What Happens If A Party To A Contract Of Sale Dies Before Completion?
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If you find yourself in a situation where a Vendor dies after the contracts have been signed (but prior to settlement), you may be feeling unsure about what is going to happen to the transaction and whether the purchase will continue as planned.
Whether the transaction will complete and if your expected timeline will change will be dependent on the deceased Vendor’s ownership, who the property is transferred to in the event of their death and any special condition in the contract of sale relating to the death of a party.
The contract of sale
The standard residential sale contracts in Queensland do not give specific rights in the event of the death of a party to the Contract prior to settlement being effected. If there are concerns that a Vendor may pass away before settlement has been completed, it may be worthwhile to include a special condition setting out what the parties’ rights are should such an event occur – such as a right of termination, a right to extend settlement, etc.
Where no such special condition has been included, generally the death of the Vendor does not affect the validity of the Contract. Upon a Vendor’s death, the rights of the Vendor under the Contract pass to their legal personal representative (ie the executor or administrator of their estate).
If one party to the contract of sale passes, it is best practice to inform the other party as soon as possible. If it is the Vendor who dies prior to the settlement of the contract, what happens next will be determined by whether they owned the property in whole or part and if the latter, whether ownership was as joint tenants or tenants in common.
How is the sale handled if the deceased was a joint tenant?
If the deceased owned the property with another party as joint tenants, ownership of their share will automatically transfer to the surviving joint tenant pursuant to the rules of survivorship. In this case, the surviving joint tenant would become the sole owner and the sale could continue in line with the contract of sale.
The surviving party must notify the Queensland Titles Office of the deceased’s death and provide evidence (such as the death certificate) for the transfer of ownership to take effect. As it can take a number of weeks for a death certificate to be issued, settlement may be delayed.
What if the property is bequeathed to another party?
In cases where the Vendor was the sole owner of the property or where there are multiple owners as tenants in common, the deceased’s share of the property will form part of the assets in their estate, which will be dealt with in accordance with the terms of their will.
It is the responsibility of the Executor/s named in the deceased’s will to apply for Probate. Once Probate has been granted, ownership of the deceased’s share in the property may be transferred to complete the sale.
Sometimes property owners die intestate (without a will). If this is the case, an eligible person, such as the deceased’s child or spouse, will be required to make an application for Letters of Administration, so that the estate assets can be dealt with in accordance with the laws of intestacy.
Unfortunately for Purchasers, applications for Probate and Letters of Administration both take time. It can be a very lengthy process, which means the property transaction is very unlikely to complete when it was supposed to. This can have an impact on loan approvals and stamp duty payment times and Purchasers should be aware that even if they would like to pursue the purchase, they should be mindful of the implications of settlement being significantly delayed.
If you have recently agreed to purchase a property and the Vendor has died prior to completion of the transaction, you should speak to your conveyancer or property lawyer about the implications of the Vendor’s death, how their ownership of the property will affect the timing of the transaction and what the next steps are, including if you will be required to continue with the purchase or if you have any rights of termination.