Authority of an Executor to Sell Property After Probate

In NSW, the executor of an estate has the right to apply for probate and once probate is granted, to manage the estate and distribute the estate’s assets according to the terms of the will. This authority may extend to the sale of property owned by the deceased. It is essential for executors to understand their rights and responsibilities under the relevant laws and to always act in the best interest of the estate and its beneficiaries. Failure to comply with these responsibilities may expose them to personal liability. 

Where a person dies without a will (known as an intestacy), the next of kin or other person may need to apply to the Court for a grant of administration. The person named as administrator will have the same power to deal with assets as an executor, had there been a will. 

Legal Authority and Responsibilities

Probate is a legal document through which an executor acquires the legal authority to act as executor of a deceased estate which, subject to the terms of the will may require them to sell a property that forms part of the deceased’s estate to pay debts or to satisfy gifts under the terms of the will. In NSW, the executor is required to act in accordance with the terms of the will and to comply with relevant legislation including the Succession Act 2006 (NSW) and the Probate and Administration Act 1898 (NSW).

Selling Property to Settle Debts

The executor may need to sell a property to settle the deceased’s debts or estate expenses. This is a common scenario where the estate’s cash assets are insufficient to cover the deceased’s debts (such as loans or tax liabilities), testamentary expenses (such as funeral or burial expenses), estate expenses (such as court costs, legal costs and tax liabilities), and gifts under the terms of the will. The sale of the property may be necessary to meet the deceased’s and estate’s liabilities before the remaining proceeds can be distributed to the beneficiaries.

Ensuring Fair Market Value

If a property needs to be sold, it’s important that the executor acts in the best interests of the estate by ensuring the highest price is attained. A common approach to ensure a fair market value is attained is for the property to be offered for sale to the general public and sold at a public auction. 

Legal Requirements for an Executor to Sell Property

In NSW, an executor must adhere to specific legal requirements when selling property comprising part of a deceased estate. These requirements ensure that the executor acts within their legal authority and protects the interests of all beneficiaries.

Obtaining a Grant of Probate

Depending on the State, the executor may need a grant of probate before they can deal with property. For example, in NSW before an executor can sell a property, they must obtain a grant of probate from the Supreme Court of NSW. The grant of probate gives the executor authority to deal with the deceased’s assets. To apply for probate, the named executor will usually engage a lawyer to prepare and lodge the application for probate with relevant supporting documentation. The executor will have the legal right to administer the estate once probate is granted. An executor will usually engage a lawyer to help them through the probate process.

Acting in Accordance with the Will

The executor must act in accordance with the terms and instructions set out in the will. If the will specifies that a particular property should be sold or distributed in a certain way, the executor is required to follow those instructions subject to certain exceptions. Ignoring the terms of the will or incorrectly administering the estate can result in the executor being held personally liable to reimburse the estate for any losses. 

Settling Debts and Taxes

Before distributing the estate’s assets, the executor is responsible for paying the deceased’s debts and liabilities (i.e. personal debts, tax debts) as well as testamentary expenses (i.e. funeral, burial) and estate expenses (i.e. court fees, legal fees, tax debts) and liabilities. This may necessitate the sale of property to generate the necessary funds to pay for these liabilities. The executor must ensure that all debts and expenses are (or will be) paid before distributing assets to beneficiaries.

Legal and Fiduciary Duties

The executor has a ‘fiduciary duty’ to the estate, which means they must always act in the best interest of the estate and its beneficiaries. This includes obtaining a fair market value for the property sold, managing the estate’s assets prudently, and avoiding conflicts of interest. Executors must maintain transparency to beneficiaries and keep relevant beneficiaries informed about the sale process and outcomes.

Situations Where the Executor Can Sell Real Estate Without Approval

There are specific situations where an executor may have the right or obligation to sell real estate without the approval of all beneficiaries. Understanding these scenarios can help clarify the executor’s authority and responsibilities.

Express Instructions in the Will

If the will expressly directs the executor to sell a particular property, the executor will have the right to sell the property if the sale will not cause prejudice to any beneficiary or third party. If the sale is controversial or may cause prejudice to any beneficiary or third party, the executor would be wise to obtain the consent from all interested parties before executing the sale. Whilst the executor is bound to follow the directions in the will, it would be unwise to proceed with selling a property without the consent of all interested parties where the executor is on notice of an objection or where a third party may suffer damage because of the sale.

Settling Debts and Liabilities

The executor may sell property to settle the deceased, testamentary or estate liabilities. If the estate’s liquid assets are insufficient to cover these obligations, the executor may be required to sell property as the executor has an obligation to ensure all debts and liabilities are (or will be) paid before distributing assets to beneficiaries. In NSW, legislation sets out the order in which assets are used to pay for deceased, testamentary and estate liabilities. 

Preventing Financial Loss

In some cases, selling a property may be necessary to prevent financial loss to the estate. For example, if a property is deteriorating or incurring significant maintenance costs, the executor may decide to sell it to preserve the estate’s value. This decision must be made in the best interest of the beneficiaries.

Court Approval

If there are disputes among beneficiaries or if the beneficiaries do not provide consent for a sale, the executor may need to seek approval from the Court. If the Court directs a property to be sold, the executor will likely be protected from personal liability if the acting in accordance with a Court order.  This legal intervention helps resolve conflicts and ensures the executor can fulfil their duties whilst reducing the risk of personal liability. 

Importance of Fair Market Value in Property Sales

Obtaining a fair market value for a property is crucial to ensure the proceeds are maximised for the benefit of all beneficiaries. The most common way to ensure a fair market value is achieved is to offer the property for sale to the general public and sell the property at public auction. Selling at fair market value best ensures an equitable distribution of assets, upholding the executor’s fiduciary duty. Transparency in the sale process helps build trust among beneficiaries and avoids potential conflicts.

Potential Disputes When Selling Property Without Beneficiary Consent

Selling property without the consent of relevant beneficiaries can lead to significant disputes during the estate administration process and in some cases, personal liability. Beneficiaries may feel the property will be sold for less than its fair market value. Such disagreements can result in legal challenges, delaying the distribution of the estate’s assets, and increase legal costs. Executors should carefully navigate these situations, potentially seeking Court approval or legal advice to ensure compliance with their fiduciary duties and minimise conflicts.

Protecting Beneficiary Rights During Property Sales

Protecting beneficiaries rights during property sales is important. Executors should ensure that all relevant beneficiaries receive their due treatment and that their interests are considered throughout the sale, where necessary. Relevant beneficiaries should be informed about the sale and given the right to know the details of the transaction. If an executor fails to obtain approval from all beneficiaries, it may lead to legal disputes and potential delays in distributing assets. Proper estate planning and transparent communication are essential to avoid conflicts and protect interests.

Seeking Legal Advice for Estate Planning and Estate Property Sales

If you are a beneficiary worried about a potential sale, or an executor contemplating a potential sale, it’s important to seek legal advice when selling estate property to navigate the complex legal process effectively. Experienced probate lawyers and solicitors can provide guidance on obtaining a grant of probate, handling objections to the sale, and ensuring that the sale is conducted fairly and legally.

If you may inherit a property that may need to be sold, or believe a dispute could arise and want to best ensure you’re getting a fair share, contact Empower Wills and Estate Lawyers on 1300 414 844 for expert assistance in estate property sales and administration.