Handling a probate property is already a complicated task, but when that property is a rental, it introduces a new set of challenges and considerations. As a probate realtor, I’ve seen firsthand the complexities that arise when tenants are involved, and how these situations require careful navigation to ensure both the estate and tenants’ rights are respected.
In this blog post, I’ll walk you through the key points to keep in mind when dealing with a probate property that is also a rental. Whether you’re the personal representative of the estate or an heir, understanding these details will help you make informed decisions about managing or selling the property.
1. Understand Tenant Rights
The first and most important thing to recognize is that tenants have rights—even in probate. A tenant’s lease typically remains valid after the property owner passes away, meaning you can’t simply remove tenants because the property is going through probate. Whether it’s a month-to-month agreement or a long-term lease, the terms must generally be honored.
Some key tenant rights to be aware of:
- Existing Lease Agreements: Any existing lease or rental agreement must be followed. For example, if there’s six months left on the lease, you’re required to allow the tenant to stay for that duration unless both parties agree to end the lease early.
- Notice of Ownership Change: As the personal representative or executor of the estate, you are responsible for notifying the tenants of the change in property ownership. This notice should be given in writing and include details about where to send rent payments going forward.
2. Assess the Condition of the Property
If the property is being rented, it’s important to assess its condition as soon as possible. While the tenants are likely still living there, you may not have full visibility into how well the property has been maintained, especially if the previous owner was not actively involved in managing it.
Here’s what you can do:
- Schedule an Inspection: With proper notice, arrange for a property inspection to evaluate its current state. This will help you determine if there are any pressing maintenance issues that need to be addressed before considering a sale or deciding on future rental options.
- Review the Lease for Maintenance Responsibilities: Depending on the lease agreement, either the tenants or the landlord may be responsible for certain maintenance and repairs. Make sure you understand who is responsible for what, as neglecting repairs could lead to legal complications.
3. Deciding Whether to Continue Renting or Sell the Property
Once you’ve assessed the property’s condition and have a clear understanding of the current lease agreements, you’ll need to decide whether to keep the property as a rental or move forward with selling it. This decision depends on several factors:
- Estate’s Financial Needs: Does the estate need liquid assets quickly to settle debts or distribute inheritances? Selling the property could provide the needed funds sooner than continuing to rent it out.
- Market Conditions: Depending on the local real estate market, it may make sense to sell the property immediately rather than continuing to rent it. A probate realtor can help you assess whether it’s better to sell now or hold onto the property.
- Tenants’ Lease: If the tenant is under a long-term lease, this may affect your ability to sell the property. Some buyers may not be interested in purchasing a property with existing tenants, while others (particularly investors) may find it appealing.
4. Selling a Probate Rental Property with Tenants in Place
If you decide to sell the property while it’s still occupied by tenants, there are several important considerations:
- Selling to an Investor: Investors are often more willing to purchase properties with tenants in place. In fact, having tenants already paying rent can be a selling point. However, you’ll need to disclose all relevant details about the lease to potential buyers.
- Offering Cash for Keys: If you need the property to be vacant before selling, you may consider offering the tenants “cash for keys.” This is an arrangement where you offer the tenant a financial incentive to vacate the property early, which can be helpful if you’re looking to sell quickly or if the buyer wants an empty property.
- Honoring the Lease: In most cases, any buyer who purchases a rental property during probate must honor the existing lease. Be sure that the buyer understands this before agreeing to a sale, and provide all necessary documents, such as the lease and rent payment history.
5. Communicating with the Tenants
Open communication with tenants is crucial throughout the probate process. Remember, they may be unaware of the property owner’s passing or the legal changes that are taking place, and they deserve to be informed every step of the way. This includes:
- Notifying them of the owner’s death and your role as the estate’s representative.
- Explaining how the probate process might affect them. For instance, you should clarify whether the lease terms will continue as-is or if there may be changes in property management or ownership.
- Providing updated rent payment information. If the rent was previously paid to the decedent’s account, you’ll need to set up a new method for receiving rent payments and notify the tenant of this change in writing.
6. Navigating Evictions in Probate
In some cases, you may need to remove tenants from the property during probate. This could be due to non-payment of rent, property damage, or other lease violations. However, eviction is a legal process, and you’ll need to follow state and local laws closely to avoid complications.
Some tips for handling evictions in probate:
- Follow the Legal Process: Even though you are managing the property through probate, you must follow the legal eviction process in your state. This usually requires providing written notice and going through the court system if the tenant does not vacate voluntarily.
- Consult with an Attorney: Because evictions during probate can be complex, especially when the property is tied to estate legalities, working with a probate attorney is highly recommended.
Managing a rental property in probate adds an extra layer of complexity to an already challenging process, but it can be done successfully with the right strategy and support. Whether you decide to continue renting the property or sell it, it’s important to respect the tenant’s rights and ensure the estate is managed efficiently.
If you’re navigating a probate property with tenants, I can help you evaluate your options, manage tenant communications, and guide you through selling or maintaining the rental property. Contact me today to learn more about how I can assist you in this process.