Jason  Lee

Jason Lee

Broker

Home Standards Brickstone Realty

Mobile:
(416) 220-9899
Office:
(905) 771-0885
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PROBATE AND THE SALE OF PROPERTY

As real estate, wills and estates lawyers, we are often asked by realtors and clients to advise as to whether or not a Seller must obtain probate in order to sell a property when the registered owner is deceased. When we advise that the Seller must obtain probate in order to sell the property, realtors will often ask us whether the property can be listed for sale and sold prior to the Seller receiving the actual probate. This column will explain what probate is, set out the exceptions to the requirement of probate to sell a property and provide advice on how to sell a property prior to receiving the probate.

The formal term for probate is referred to as Certificate of Estate Trustee With (or Without) a Will. We will first discuss what probate is and why it is necessary to sell a property. Probating a will is the process whereby a will is “proved” in a court of law and grants the legal authority to act as estate trustee to administer the estate. Once the court issues the probate, the estate trustee is given the authority to administer the estate as per the instructions set out in the will by the deceased testator/testatrix. If there is no will, then someone will need to apply to become the estate trustee on behalf of the estate.

In order to probate a will, the estate trustee will need to submit a number of documents to the court including the original will, an affidavit of execution of one of the witnesses and will have to pay the applicable estate taxes. While the estate trustee can submit the probate application itself, it is strongly recommended that an experienced estates lawyer prepare and file the paperwork to avoid errors which will only delay the issuance of the probate if the court rejects the probate application.

Typically, a will is required to be probated when there are assets for which the estate trustee requires probate in order to manage or distribute the assets of the estate. The most common situations requiring probate are where the deceased owned real property, bank and/or investment accounts without designated beneficiaries or where the deceased had a safety/safety box located within a banking institution.

In most cases, probate will be required in order to sell a property. However, there are exceptions to this rule. One is where the value of the estate is less than $50,000.00. Another exception is the first dealings exemption which is available where there have been no dealings with the property since the property was converted from the Registry system to the Land Titles system. In either of these situations, the Land Registry Office will waive the requirement of probate resulting in potential costs savings as well as the ability to have a quicker sale of the property. It is to be noted, however, that these 2 exceptions are rare, and, in most cases, probate will be required by the Land Registry Office in order to sell a property owned by a deceased person.

We are often asked how long it will take to obtain the probate from the court. This is a very difficult question to answer as the time to obtain the probate depends on various factors including the location of the court where the probate has been filed and whether there is a will and the specific circumstances of the probate application. However, the probate process can take 4-6 months or longer but in some circumstances can be expedited if the court is provided with a copy of an Agreement of Purchase and Sale for a closing.

We are often asked whether a property be sold while awaiting probate. While the answer is yes, there may be complications if the proper precautions are not taken. If the Seller is anxious to sell the property, we recommend that they try to negotiate a minimum 3-4 month closing date. We also recommend that the Agreement of Purchase and Sale contain a clause whereby the parties acknowledge that probate is required to sell the property and that the Seller can extend the closing date for a period of time to allow for the receipt of the probate upon written notice of this to the Buyer. The Agreement should also address what happens if probate is still not available by the extended closing date. Failing to have an extension clause can result in the deal terminating which could be problematic for both the Buyer and Seller. I have seen situations where the Buyer was not willing to extend the closing because it was going to lose a guaranteed interest rate on its mortgage or already gave notice to its landlord that it would be vacating its current rental premises. Conversely, a Seller could end up losing a sale thereby forcing it to relist the property and end up selling the property for less than the price in the original Agreement.

Another option to a lengthy closing date involves an escrow agreement whereby the Buyer moves into the property, however, do not become the legal owners of the property until probate is obtained. Such escrow agreements involve many issues and are not straightforward. Any such agreements will need to be carefully drafted and will require review and assistance of an experienced lawyer to explain the risks to their respective clients.

As can be seen, legal advice is necessary to determine whether probate is necessary at all. If probate is required to sell a property, then the parties and their agents should receive legal advice to ensure that the Agreement of Purchase and Sale contains the appropriate probate clauses while the parties await the probate.

Lorne Shuman / March 27, 2023

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