By Jim Sisson, Chief Financial Officer at Tower Street Finance
When people pass away, they leave behind all kinds of assets and heirlooms. Property is often among the most valuable assets and managing property is a key concern for those tasked with dealing with an estate.
However, there are never any guarantees regarding the property's condition. While some may have been maintained to high standards for years, others may have fallen into a state of disrepair. Therefore, such issues beg the question – can (or even should) improvements or upgrades be made to a property in an estate?
To tackle this question, it is worth considering the role of a Personal Representative when it comes to property. In basic terms, they have to collect, protect, and maintain the asset in the condition it was in at the moment of the deceased’s passing.
As such, upgrades to the property are not their responsibility. However, they would be expected to deal with more general maintenance issues, such as water leaks, roof repairs, etc. In these scenarios, they must, for example, repair both the leak and any damage, so that the property is restored to its original condition.
The Personal Representative is not responsible for upgrading the property to maximise the sale value. Therefore, if (for instance) the property had a low Energy Performance Certificate rating and prospective buyers could not obtain a mortgage, the strict duties of the Personal Representative would be to dispose of the property in another way – for example, with a cash buyer.
Therefore, a Personal Representative must balance their responsibilities to any individual beneficiary against their responsibilities to the estate as a whole.
To be clear, the legal process of estate administration does not prevent any upgrades from taking place. However, such works are not a testamentary matter. As a result, there are a few things that need to be kept in mind:
- As upgrades could incur costs and impact on the timeframe of sale, all beneficiaries should formally agree that the work is in their collective interests.
- If some beneficiaries do not agree with the work, the other beneficiaries could ‘pay them out’ of their share. If this is not possible, the property may need to be sold in its current state and there are products available to help if this is required.
- Any upgrade would be an action by the beneficiaries. Personal Representatives could assist in some capacity, but it would not be related to their legal duties.
- Personal Representatives may also be uncomfortable with extended delays to the administration process arising from any property works (especially if they are personally liable for any Testamentary Expenses). Products exist to fund these expenses and remove liability from the Personal Representative if required.
In all cases, all parties need to agree before proceeding.
Making the upgrades
So, how could beneficiaries ultimately proceed? There are two potential avenues they could explore:
- The Personal Representative would need to confirm that all beneficiaries agree to any works (to ensure any risks and delays are acceptable). Unless individual beneficiary objections can be properly resolved, the works must not progress. Costs of any works could be met by an inheritance advance loan (to an individual or multiple beneficiaries). Properly constructed, this product allows beneficiaries to access a portion of their inheritance sooner, with repayment coming from distribution of inheritance from the estate.
- Alternatively, the beneficiaries could request that the Personal Representative handles the work. It is possible for all beneficiaries to agree that the Personal Representative may recover these costs from the estate before distributing their inheritance. This may therefore allow a Personal Representative to use an estate funding product, taken out in their name and repaid from the proceeds of the estate.
Consider your options
While upgrades to an estate property are not a testamentary matter, that does not necessarily mean that they cannot be arranged.
There are potential approaches that can be taken on the issue, so it is well worth considering your options if you are in this kind of situation.
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