What is Probate?
Probate is a legal process that confirms the validity of a deceased person’s Will and formally authorises the executor named in it to deal with the deceased’s assets. When it comes to property, this legal “tick of approval” from the Supreme Court gives the executor authority to transfer ownership of real estate owned by the deceased.
Why is Property Sold “Subject to Probate”?
An executor may decide to list a property for sale before the grant of probate has been issued. This is often done to get the ball rolling on the sale process, particularly if there is a need to sell the property to pay debts of the estate or distribute funds to beneficiaries.
Because the final settlement (and transfer of ownership) cannot occur until the executor is legally authorised to deal with the property, the contract for sale will include a “subject to probate” clause. This enables the parties to legally enter a contract with the sale conditional upon probate. A “subject to probate” clause typically provides that:
- The buyer acknowledges that the vendor is selling in their capacity as executor
- The contract is conditional upon probate being granted within a specified time, for example, 6 months
- The buyer can rescind (terminate) the contract if probate is not granted within the specified time and have their deposit refunded
- Completion of the contract will occur (usually) 2-3 weeks after the buyer has been notified of the grant of probate
For Sellers: What to Expect
If you are the executor of an estate and plan to sell a property, here’s what you need to keep in mind:
- You can list the property: You can put the property on the market and exchange or enter contracts before probate is granted.
- Settlement delay: The settlement date for the sale will be contingent on probate being granted, rather than a specific date as directed in the contract. Typically, this means the sale process will take longer than a standard property sale.
- Legal authority: Until probate is granted, you do not have the legal authority to transfer the property title to a buyer. The “subject to probate” clause protects both parties by making the settlement conditional on this legal step.
- Transparency is important: Be upfront with potential buyers about the circumstances and “subject to probate” condition. This helps manage expectations and avoid misunderstandings.
For Buyers: What to Consider
If you are buying a property that is “subject to probate”, there are important factors to be aware of, including:
- Extended settlement period: The probate process can take time, and this should be a significant factor in your plans. While some probate applications can be processed relatively quickly (for example, 4-8 weeks), delays can occur if there are issues with the Will, missing documents, or if the estate is complex. Current court processing times can also vary.
- Uncertainty of settlement date: Because the settlement depends on the probate grant, there isn’t a firm completion date when you enter the contract. This can impact your moving plans, accommodation needs, or the timing of a related property sale.
- Finance approval: If you’re relying on a loan, be mindful that loan approvals typically have expiry dates. A prolonged probate delay could mean your finance approval expires, potentially requiring you to reapply or seek an extension. Discuss this with your mortgage broker or bank before entering a contract.
- Potential for disputes: While less common, disputes among beneficiaries or challenges to the Will can arise, which would significantly delay or even halt the probate process and, consequently, the property sale.
- Stamp duty: Beware of your jurisdiction’s requirements for when stamp duty (transfer duty) is payable on your purchase. For example, in New South Wales, duty is generally payable within three months of signing the contract, regardless of whether settlement has occurred. This is an important financial consideration.
Conclusion
Buying or selling a property “subject to probate” can involve a longer and less predictable timeline than a standard transaction, and appropriate clauses should be included in the contract to protect both parties. While adding a layer of complexity to a conveyancing transaction, with professional guidance, clear communication, and a proper understanding of the process, a “subject to probate” transaction can proceed relatively smoothly.
This is general information only and we recommend you obtain professional advice relevant to your individual circumstances and needs. If you or someone you know wants more information or needs help or advice, please call 02 9150 6991 or email ad***@**********om.au.