When it comes to property transactions, you might occasionally see a listing or contract that mentions “subject to probate.” This indicates that the property is part of a deceased estate and introduces unique considerations for both buyers and sellers in Australia.
What is Probate?
Probate is a legal process that confirms the validity of a deceased person’s Will and formally authorises the executor to deal with the deceased’s assets. For property, this legal approval from the Supreme Court allows the executor to transfer ownership of real estate owned by the deceased.
Why is Property Sold “Subject to Probate”?
An executor may list a property for sale before probate is granted. This often helps start the sale process, especially if the property needs to be sold to pay debts or distribute funds to beneficiaries.
Since the final settlement and transfer of ownership cannot occur until the executor has legal authority, the contract includes a “subject to probate” clause. This clause usually provides that:
- The buyer acknowledges that the vendor sells in their capacity as executor
- The contract is conditional on probate being granted within a specified period, for example, 6 months
- The buyer can terminate the contract if probate is not granted in time and have their deposit refunded
- Completion usually occurs 2-3 weeks after the buyer is notified of the probate grant
For Sellers: What to Expect
If you are the executor of an estate and plan to sell a property, keep in mind:
- You can list the property: You can put the property on the market and exchange contracts before probate is granted.
- Settlement delay: The settlement date depends on probate being granted, not a specific date. This usually makes the sale process longer than a standard transaction.
- Legal authority: Until probate is granted, you cannot transfer the property title. The “subject to probate” clause protects both parties.
- Transparency is important: Inform buyers about the “subject to probate” condition to manage expectations and prevent misunderstandings.
For Buyers: What to Consider
If you are buying a property “subject to probate,” consider the following factors:
- Extended settlement period: Probate can take time. Some applications process in 4-8 weeks, but delays may occur if there are Will issues, missing documents, or complex estates. Court processing times vary.
- Uncertain settlement date: The settlement depends on the probate grant, so there is no firm completion date. This can affect your moving plans, accommodation, or timing of a related sale.
- Finance approval: Loans have expiry dates. Probate delays may require reapplying or extending your finance approval. Discuss this with your broker or bank before entering a contract.
- Potential for disputes: Disputes among beneficiaries or challenges to the Will can delay or halt probate and the property sale.
- Stamp duty: Know your jurisdiction’s rules for paying stamp duty. For example, in NSW, duty is generally due within three months of signing the contract, even if settlement has not occurred.
Conclusion
Buying or selling a property “subject to probate” can take longer and be less predictable than a standard transaction. Including appropriate clauses in the contract protects both parties. With professional guidance, clear communication, and understanding the process, a “subject to probate” transaction can proceed smoothly.
This is general information only. You should seek professional advice relevant to your circumstances. For more information or legal help, please call 03 9670 7440 or email [email protected].