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Death of a Landlord or Tenant

Introduction

When a person dies, someone has to deal with their affairs. This is called ‘administering the estate’. If the person who has died leaves a will (testate), it will usually name one or more people to act as the executors of the will. For them to administer the estate, they will need to apply to the court for a Grant of Probate. This is an official document which gives the executors the necessary legal authority for this task.

Intestate

A Grant of Probate or Administration will always be needed where the deceased is a property owner. Nothing can be done to sell, end the tenancy, re-let or deal with the property until the Grant of Probate or Administration is made.

Personal representatives
In both testate and intestate estates we refer to the executors or administrators as Personal Representatives (PR) The PRs are responsible for making sure that the estate is administered correctly. If there is a Will, the PR must make sure that the wishes of the person who has died, as set out in their Will, are followed. If there is no Will, they must follow the rules of intestacy (set out in the Administration of Estates Act 1925).
There can be a delay in the process where the Will is contested or, in the case of an intestate, if no one applies to obtain the grant of administration.

Types of ownership
Where the let property is owned in the sole name of the deceased, the property cannot be dealt with in accordance with the will or intestacy law until a Grant of Probate or Administration is obtained. However, necessary actions can still be carried out to protect the asset, i.e. renewing insurance, essential repairs and so on. It could be advertised for sale or to let, but no transaction can be progressed, so it is better simply to wait.

If the property is owned jointly then in most cases the entire property will now transfer to the survivor, subject to mortgage or other encumbrances, and of course the existing tenancy. Typically, this would arise in the case of a couple who bought and owned an investment property to let out. A death is registered at the Land Registry with a copy of the death certificate and the survivor is now the sole owner. This would arise whatever the terms of a will as long as the joint tenancy was not severed prior to the death by action or divorce.

So where a property is purchased in joint names, the parties will hold the legal estate as joint tenants and the beneficial interest in the property as either joint tenants or tenants in common. Joint tenants are entitled to an equal share of the property, whereas tenants in common are able to hold the property in either equal or unequal shares. The latter is more common in a business partnership and where more people are involved. It may also arise as part of tax planning. There is usually a declaration of trust clarifying these arrangements.

Where the property is owned as tenants in common then each owner has a defined share that will fall into his estate and not pass to the survivors unless this is expressed in a will or Trust Deed. Where a property is owned jointly, it is important where one party dies to establish if they were joint tenants or not, and on what basis. There can be no transaction on the property on the instruction of the survivor because part of the property is now in the estate of the deceased co-owner unless, as stated above, they are joint tenants in equity.

The tenancy
The beneficiary of the original landlord's estate will become the new landlord or lessor of all or part of the property. These changes, however, do not affect the fundamental nature of the tenancy or give any of these persons the right to claim possession of the premises in circumstances other than those which would have applied to the original landlord. So, to a large degree, the tenancy will, in practice, be unaffected - or at least until the remaining tenancy expires and falls due for renewal. At the expiry of the tenancy, the new owner (as beneficiary of the estate) may choose to extend or continue the tenancy in the normal way. Alternatively, the executors of the estate or future beneficiaries may need or decide to sell the property. In the unusual situation where there are no heirs, or traceable close relatives, the property will pass to the Crown as bona vacantia (ownerless property).

The agent’s legal status
The agency agreement, unlike the tenancy, is like other contracts held by the deceased; it will end immediately upon the death of either the landlord or the agent. The agent is disinterested and has no authority to act or take any action in the short term. However, the agent can act under an agency of necessity and continue to manage the property until probate has been granted. A good agent will show patience and sensitivity throughout this process - which can be both complex and protracted.

Duty of care
From a practical point of view the agent cannot end or start a tenancy. He should continue to collect rent and manage rent arrears as well as carry out statutory obligations such as health and safety matters and essential repairs. The agent still has a duty of care to the tenant but ought not to spend any money on anything not strictly urgent or necessary because the eventual owners have no obligation to indemnify the agent against any unnecessary costs or commitments. This is not a major issue where solicitors are acting in the estate as the agent may go to them for instructions. Also in most cases where PRs are involved, they will guide the agent until the Grant is made, at which point they can legally give instructions.

Monetary ramifications
The agent will continue to collect rent but he cannot transfer it to the landlord’s bank as the account will be frozen. He may not pay the money to any third party until the Grant is made. A next of kin or others claiming the rent may not be the eventual beneficiary of the estate, so the agent must take care. However a next of kin (or the expected beneficiary) may give an indemnity to the agent allowing the agent to release cash, but the agent ought to seek legal advice prior to releasing any funds. Solicitors usually take care of these issues, but the agent must be cautious. The agent may of course continue to deduct fees from rent and other necessary expenses, but must keep proper accounts and not charge anything over and above what is covered under the old terms of business. He may not vary the terms of business, but the law permits the agent to be paid for necessary services during this interim period.

Next steps
Once Grant has been completed, it is likely that the property will either be sold so that its proceeds can be used and distributed as part of the deceased's estate, or the ownership passed to the beneficiary under the terms of the deceased's will (or law of intestacy if the former landlord has died intestate).
In the event of the executors ordering a sale, it will be necessary to obtain possession by serving notices in accordance with the tenancy agreement. For an assured shorthold tenancy this is still not less than two months and it may not expire before the end of the fixed term. It may of course be possible to exercise a break clause or negotiate an earlier surrender with the tenant.

Legal notices
As soon as the legal estate in the property has been transferred to the beneficiaries, the new landlord is required to notify the tenant of this change to the tenancy (Housing Act 1985, section 3). There is no prescribed form - the new landlord is simply required to inform the tenant in writing of the change of landlord. The notice should be served on the tenant as soon as possible. According to section 3, the notice should be served; not later than the next day on which rent is payable under the tenancy or, if that is within two months of the assignment, the end of that period of two months.
For the purpose of compliance with section 48 of the Landlord & Tenant Act 1987, this notice should also include an address in England or Wales at which notices may be served.

Other considerations
In some cases, the agent may be instructed by a person acting under a Power of Attorney (POA). If the grantee of the POA dies, the attorney can no longer act. If the attorney dies, a new attorney must be appointed, however most people appoint two attorneys to avoid this event. The next of kin, PRs or beneficiaries may wish to inspect the property and valuations will also be required and this may also include, in a furnished property, any valuable fixtures and fittings remaining in the premises. Whilst they should seek the tenant's permission to carry out such inspections (on reasonable notice), no items should be removed from the property during the currency of the tenancy without the agreement of the tenant. These items form part of the tenancy and the tenant's right to ‘peaceful enjoyment’. It must also be understood that the tenant may refuse such an inspection or visit and there is nothing the estate can do to force this without a court order, which in these circumstances may be hard to obtain unless there are repairing issues at the property.

Deposit
Finally, there could be issues around the release of the tenant's deposit at the end of the tenancy. Since April 2007, these deposits have been protected by statute (sections 212-215, Housing Act 2004). In the case of a custodial deposit, the PRs will need to authorise the Deposit Protection Service to release the deposit to the tenant, or authorise the agent to do this on their behalf.

Death of a Tenant
Introduction
There can be confusion about what happens to an assured shorthold tenancy when the tenant dies.
Anyone engaged in letting or property management is likely at some stage to discover that a tenant has died during the tenancy. Quite apart from having to process this news it is also necessary to think about what happens next. Questions that frequently arise are: does the tenancy end or continue? Can others living in the house remain in possession? Is rent still payable and who is responsible? Can the landlord retake possession — if so when and how? Who pays for any damage at the property and is anyone liable for any rent arrears? What happens to the deposit? Is the guarantor still liable?

The answers to these questions fall within a legal framework around succession and established landlord and tenant principles although they will vary slightly with different types of residential tenancies.

Important legal points
Crucially and contrary to popular understanding, a tenancy does not end when the tenant dies. We will consider this point and the questions that arise, specifically in relation to an assured shorthold tenancy (AST).

Joint tenants
Where more than one person rents a property, the tenants are usually jointly and severally liable. The surviving tenant or tenants will acquire the deceased tenant’s share under the right of survivorship. For example, where a couple are renting a house and one partner dies, the partner who survives will simply remain as the sole tenant and continue to assume the rights and obligations contained in the tenancy agreement.
From the landlord’s position there is nothing to be done other than to record the death and ensure all future communications and any notices are given in the sole name of the survivor. A new tenancy agreement is not required, although on renewal any new agreement should be in the sole name of the survivor. The same position would apply whether it is a fixed-term or periodic tenancy.

Sole tenant
If the death of a sole tenant occurs part way through a fixed-term tenancy, the remaining period of the tenancy becomes a property right in the estate of the deceased. The tenancy is an asset in the estate and so whoever administers the deceased estate (who may or may not be next of kin) can retain possession of the property; they will of course be liable for rent and bills. A family member or friend may be living there. Similarly, if the sole tenant dies during a periodic tenancy under the Housing Act 1988, the tenancy will continue until surrendered by the Personal Representative. However, in this case the landlord may seek possession by serving a section 21 notice. In both situations, fixed and periodic, the landlord can serve a section 8 notice applying ground 7

The Personal Representatives
Personal Representatives (PR) is the collective name for one or more people who are legally entitled to administer a deceased person’s estate. If there is a will naming the PR, then that person/s will be known as the executor (sometimes called an executrix, if female) to deal with the estate. If there is no will (or if there is no executor named in the will, or if the executor is unable or unwilling to act), the Administration of Estates Act 1925 sets out who can apply to the court to be the PR (usually a close relative of the deceased) or the administrator.

Liabilities
The rights and obligations of a PR are the same as the tenant’s.
Any money or other outstanding liability due to the landlord or third parties, such as utilities, will have to come out of the estate. These liabilities must be paid first so any rights to inherit or anything due to the beneficiaries of the estate cannot be paid before these liabilities have been fully discharged. The liabilities are not a debt due from the PR personally, but only in the role they have in winding up the estate. If the estate has no money or assets then the PR will be unable to pay the landlord.

Who is the PR?
Discovering the identity of the PR is not always straightforward.

If the tenant has left a will, the PR will be named as executor; there may be one or more and they may or may not be family members. If the tenant has not made a valid will, a relative (usually) or friend may become the PR by making an application to the Probate Court for what is called a ‘Grant of Letters of Administration’. Once granted, the PR will then be able to wind up the estate of the deceased tenant including dealing with the ending of the tenancy. If there is no appointed PR, or no one willing or able to take on the role, then the Official Solicitor and the office of the Public Trustee will administer the estate. In this situation the landlord may serve any notice needed to end the tenancy directly on the Public Trustee. The website bit.ly/Public_Trustee provides useful advice to landlords plus a form to download for use in this situation. Basically, the landlord must do the following:

•    Post or deliver a letter to the tenant’s last known address saying you are giving written notice — you do not need to get proof of this.
•    Send a copy of the notice and a completed NL1 form to the Public Trustee.
•    Register the notice with the Public Trustee, addressing the written notice to: “The Personal Representative of [full name of the tenant who died] of [last known address for the tenant who died]”.

The landlord’s rights and obligations
On hearing of the death of the tenant, the landlord may wish simply to take the property back but cannot do so without the agreement of the PR. To end the tenancy, the landlord will need to serve a notice on the PR (and anyone else living at the property) and if necessary obtain a court order. For a periodic tenancy, the landlord may serve a section 8 ground 7 notice or a section 21 notice. This is delivered to the PR and it expires two months later. If proceedings are necessary, these must start within 12 months of the date of service of the ground 7 notice.

If the tenancy is still within a fixed term, the landlord may use section 8 ground 7 or, where there are rent arrears, he may use the section 8 ground 8 procedure. Assuming there are no rent arrears and to be sure of obtaining possession at the end of the fixed term, the landlord will need to serve a section 21 notice on the PR. If possession is not given, the landlord may then use the accelerated possession procedure in court assuming there was a written tenancy agreement and a copy of the death certificate.

The tenant’s rights and obligations
The tenant’s rights and obligations under the tenancy agreement pass to their PR immediately upon death. Rent due is still payable and rent arrears may be claimed as well as damages for any breach of the tenancy such as property damage. These claims come out of the deceased’s estate before the beneficiaries can inherit. It must be stressed that the PR is not personally liable. This means that if the deceased left no money or assets, the liabilities will not be met at all.

The family of the deceased tenant will lose part of their inheritance where the deceased owed a liability to the landlord, so they should be made aware that the death has not ended the tenancy and that liability for rent and other charges continues. The PR may offer to surrender the tenancy to the landlord although the landlord is not bound to accept it. If it is a periodic tenancy, the PR may simply give a notice to quit and hand the property back to end the liability. The ongoing liability will end at that point.

Guarantor
The tenancy does not end on the death of the tenant and neither does the guarantor’s liability (assuming the guarantor agreement was entered into correctly and was valid at the time of death). If the tenancy is periodic, the guarantor may simply give notice to end the guarantee in the same way as the PR can give notice to end the tenancy. The ongoing liability will end with the notice but in practice the guarantor may remain liable for any monies owed up to that date. If it is a fixed-term tenancy, with time to run, the guarantor’s liability continues to the end of that term. However, the guarantor cannot be expected to pay anything until the landlord has exhausted a claim from the estate of the deceased tenant and found it unpaid. It is only an issue for the guarantor if the tenant had no assets.

What to do in practice
Here is a short, but not exhaustive, list of things that a landlord or agent should do on learning that a tenant has died:

• If it is a joint tenancy, note the date of death on file and communicate with the survivor/s to affirm that the tenancy will continue. Sometimes in these situations the survivor may fear they will have to move out. It is wise here to discuss the future of the tenancy sensitively in terms of affordability / suitability.

• If it is a sole tenant, ask the next of kin if the deceased left a will and if so obtain the names and address of the executors. If there is no will, enquire of the next of kin who will become PR and what they propose to do. Where there is no information about next of kin, start with the tenancy application form and contact the next of kin listed when the tenant initially applied for the property. If no response, it can be worth speaking to neighbours or enquiring with the tenant’s bank. The bank will tell you nothing, but will pass on communications if they have a contact. The same could be done via the local doctor’s surgery or, where the death is sudden or unexplained, the police and Coroner will be involved and may assist with contact for next of kin. In the absence of any information, contact the Office of the Public Trustee and serve notice there, following the guidance on the website.

• Where there is contact with the next of kin, it is usually best to suggest or accept an offer to surrender the tenancy. In this way, the property comes back sooner and the estate liability ends. It also means that re-letting can proceed quite quickly. A move-out check is needed and any liabilities can be negotiated and settled as part of this. If it is a fixed-term tenancy, there is no obligation for the PR to surrender the tenancy and there is no obligation for the landlord to accept it. However in practice, if the PR wants to hand the property back, it can be confrontational to say no and to claim full rent to the end of the tenancy, even though the landlord is entitled to do so.

• Where a sole tenant dies and the property continues as unoccupied, the landlord should advise the insurance company. The landlord also has no automatic right of access to the property and should only enter the property with the prior consent of the PR or the consent of the Office of the Public Trustee. If the landlord attempts to regain possession without an express agreement or a court order, he will be carrying out an unlawful eviction, which is potentially a criminal offence and, from this April, a banning order offence.

• Any deposit taken must be returned to the estate although it may continue to be held in the deposit protection scheme until the tenant’s liabilities have been met. The landlord’s claim on the deposit remains valid until all claims have been paid. If there is a deposit dispute, it will be resolved in the usual way and the PR or the Office of the Public Trustee will represent the former tenant’s interest.

• Where there is uncertainty about who are the PRs, the landlord should exercise caution because the person presenting as PR may not be entitled to deal with the estate — they may have other motives, so checking this is important before any agreements are made.
Summary

In most cases with ASTs, landlords reach a timely agreement with family members and the property comes back. But if not, the legal process is largely effective

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