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Probate and The Sale of Property

Written by Lorne Shuman, ShumanLaw.ca

What a probate is? It is needed to sell a property, and can a property be listed and sold before receiving the probate. This post will examine all of these questions:

What is a Probate?

It is important to note that probates are formally referred to as a Certificate of Estate Trustee With or Without a Will. Let us first establish what a probate is, and why it is even necessary at all. Most people have wills, in which they name an Estate Trustee who is responsible for administering the estate. However, in the event that the Estate Trustee attempts to sell the property of the deceased, the Land Titles registry office will often require probate in order to allow a transfer of title to a beneficiary of the estate or to a third party. Probate confirms proof of a few key factors; that the drafter of the will has died, that the will is valid and is the final version, and that the person claiming to be the executor is formally appointed as the Estate Trustee.

To obtain a probate, the executor is required to submit the will to a court (usually through a lawyer), together with an application for probate and the applicable estate taxes. The probate process usually takes 4-6 months.

Is a Probate Necessary to Sell a Property?

The short answer to the question above is that a probate is not always necessary to sell a property. Typically, in order to sell a property, the Land Titles system requires a Certificate of Appointment of Estate Trustee to be granted prior to the transfer of the property. However, there are two key exemptions. The first exemption is that estates with a value of less than $50,000 are exempted from probate. Another exemption is the first dealings exemption, available in situations where the deceased owner acquired the land previously in the Registry System, which was subsequently converted by the government to the electronic Land Titles system and there has been no other dealings with the property since the conversion.

If the property falls into one of the exemptions, then the probate can be avoided resulting in a substantial costs savings to the estate. Furthermore, the absence of the probate allows for a quicker sale, resulting in the beneficiaries obtaining their inheritance more expeditiously.

Do You Need to Obtain the Probate Prior to Selling a Property?

A question that often arises is whether a property can be sold while waiting for probate. While the short answer is yes, it is important to understand the nuances of how this may affect a deal. In some cases, sellers prefer not to wait for the probate to be completed, as they would like to capitalize on a hot market. Thus, sellers can list and sell their house while the will is still in the probate stage. However, the drawback and requirement is that the closing date for the property cannot be before the probate has been obtained. Thus, the closing date is often later than normal, and the buyer should be aware of this.

In the event that a probate cannot be obtained prior to the closing date, there are two alternatives which are generally used in order to handle the situation. The first involves the amendment of the closing date, to allow additional time to obtain the probate. This option can be negotiated into the original deal, where the seller inserts a clause which allows the seller to extend the closing date in order to allow additional time to obtain the probate. The other option involves an escrow agreement, where the buyers would move into the property on the scheduled date, however they would not become the legal owners until after the probate has been obtained and the title has been transferred. Both of these situations require mutual agreement. Other solutions involve rental agreements, or rush applications for the probate.

In conclusion, legal advice is recommended to look at the individual circumstances to determine whether probate is necessary in order to sell a property. Secondly, if probate is required, it is recommended that all agents/clients receive legal advice to determine the appropriate clauses to be inserted into the Agreement of Purchase and Sale when the parties are waiting for the probate.

Courtesy: Lorne Shuman, ShumanLaw.ca