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Can Executors Rent out Property?


Can executors rent out property?

Do executors have the power to rent out property of a deceased owner?

 

Sometimes executors want to rent out a deceased person’s property. The question is, can they do that?

 

It’s a straightforward question but the answer isn’t always straightforward.

Executors of a Will and Administrators of an intestate estate really need to be sure they have the powers they need, especially when dealing with the deceased’s property.

 

What can executors do with the deceased’s property?

Executors and trustees have general powers to manage a deceased person’s property. That can include the power to sell, or lease a property or even mortgage it if they need to for the purposes of administering the estate. They also have the same power to sell, lease or mortgage the property if they continue to hold property for the benefit of a minor beneficiary or during a life interest.

The important point is that the authority to sell, lease or mortgage must be used for the purpose of administering the estate.

Executors who rent out property for some other reason could be exceeding their powers.

 

Where does the power to rent out property come from?

The power to grant a lease of a deceased person’s property potentially comes from several different sources. If there’s a Will it’s likely there’s either express or implied authority to lease property contained in it.

If there’s an express power then it will be clear the deceased wanted their property to be rented out to tenants or even to a beneficiary. Alternatively, the power could be implied. For example, if the Will states that a beneficiary is to receive income that could imply that the executors have authority to rent out the deceased’s property for the purpose of generating rental income. A lot depends on the circumstances.

If the deceased didn’t make a Will or it’s not obvious from reading the Will whether the deceased has given authority to rent out property in the estate, then you need to look elsewhere for authority.

Under the general law on inheritance i.e. legislation and the common law, there are powers for executors and administrators to grant a lease of a deceased person’s property. They must use that authority with care. Executors and administrators have obligations to preserve assets and avoid loss to the estate.

Letting a property to tenants can be a risky business:

  • Tenants might fail to pay the rent or damage the property
  • The rental market might be very static resulting in a poor investment return
  • Repairs and unforeseen expenses might exceed the amount reserved.

 

How can you decide if you should rent out property?

It’s a big responsibility to rent out property. You must be able to justify the decision. You might be called upon to justify it years later. The best way to do that is to have evidence to back up your view that leasing the deceased’s property is sensible.

“Read my tips for executors on renting out property” – Rosamund Evans

it’s important to remember that executors must act in the best interests of the estate as a whole. I’ve sometimes come across executors who decide for personal reasons to rent out property in an estate as a way of delaying selling it. Some executors want to retain control over estate assets for longer than is strictly necessary or even just to annoy or frustrate the beneficiaries. Executors who behave in that high-handed way are taking a risk. Unless they can justify their actions as being ‘for the purpose of administering the estate’ they could open themselves up to a claim against them by the disgruntled beneficiaries.

 

Can beneficiaries stop executors using the power to rent out a property?

The short answer to that question is, it all depends. Executors and Administrators control the estate assets until such time as they have completed administering the deceased’s estate. During that period the beneficiaries (unless they are also the executors) have little say in the way the estate is administered.

In practice, however, beneficiaries usually do have quite a lot of influence over the decisions made. Beneficiaries can (and do) complain if they are unhappy with the way an estate is being managed by the executors. If beneficiaries are too young to complain their parents, guardians or trustees can do so on their behalf.

As ever, it comes back to the problem of personal liability. It’s not enough to have the power to rent out property – you must be able to justify the decision to do so.

Tips for executors on the power to rent out property

Here are a few simple steps to help avoid trouble:

  1. Check whether the rental arrangement falls within your authority;
  2. Find out what the beneficiaries think and keep a record*;
  3. Study the local rental market;
  4. Consider what type of tenancy is most suitable e.g. would holiday lets be more profitable?
  5. Work out how long you’re likely to want to be involved in letting the property;
  6. Take professional advice on the legal, financial and regulatory responsibilities of being a landlord.

*Good record keeping and documenting decisions is essential for executors.

BE My Own Lawyer logoWe have a selection of useful templates for letters and other documents executors can use to stay compliant and avoid problems. They’re available through our subscription service BE My Own Lawyer here.

 


 

Read more from our blog by following the links below and remember to check the date of articles. We update our posts regularly to keep them accurate and relevant but the law may have changed since some of our older articles were posted.

 

 

 

 

 

 

 

 

 

 

 

 

 

 

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