Covid has changed our reality. We find ourselves facing unexpected and often unimaginable obstacles. Having to wind up a loved one’s estate is one such obstacle many have been confronted with. The process and possible delays associated with the winding up of a loved one’s estate is a challenge we can be better prepared for, and therefore, it is important to understand what goes on behind the scenes of your conveyancer. Transfer out of the deceased’s estate follows two possible processes: transfer to the heirs or transfer to a purchaser buying the property out of the estate. The two options vary significantly in costs and turnaround time. Therefore, understanding the implications in either scenario can alleviate one’s apprehension.
When transferring a property to an heir as instructed via a valid will, or to any person legally entitled (in terms of the Intestate Succession Act) when a valid will has not been executed, one of the supporting documents to be filed at the Deeds Office is a conveyancer’s certificate Section 42(1) of the Administration of Estates Act. This certificate verifies that the proposed transfer is (a) in accordance with the liquidation and distribution account, drafted by the executor of the deceased estate, and (b) has lied open for inspection and was not objected to. The executor has 6 months from appointment to submit the account to the Master, after which it is to lie for inspection for a period of 21 days. These transfers can be substantially delayed by external circumstances.
When transferring property from a deceased estate in terms of a sale agreement (not a will) to a purchaser, a Master’s certificate is to be filed at the Deeds Office (per Section 42(2) of the Administration of Estates Act). This is merely an endorsement or authorisation stamped on a Power of Attorney and does not require a supporting document, unlike in the previous scenario. This endorsement acts as consent by the Master to permit the transfer of the property to a purchaser. It is important to note that in this case, a liquidation and distribution account need not be filed at the Master or even drafted at this stage, saving you plenty of time. In this process, the main delay would be obtaining the Master’s consent. While this could take months, the turnaround time for these transfers is generally faster than transfers as in the first scenario. Once these certificates and consents have been obtained, the standard conveyancing process can continue.
The costs associated with the two processes also differ. The usual costs involved in the conventional transfer of a property are charged when inheriting a property. This includes the conveyancing fees, which are based on the value of the property and based on guidelines stipulated by the Legal Practice Council, rates and levy certificates, and any Deeds Office fees. It also includes all outstanding taxes, as well as the outstanding payments on the mortgage bond registered over the property, if applicable, which are also to be paid, unless the heir wishes to be substituted as the debtor under the mortgage bond (this would be subject to the bank’s approval).
The good news is that these costs are paid out of the deceased’s estate by the executor, and heirs or any person legally entitled to inherit are exempt from paying transfer duty. However, when there is a liquidity shortfall in the estate, the executor may approach the heirs to either settle any outstanding debt out of pocket or obtain their written permission to sell assets within the estate to settle the deficit.
Should there be a deficit in the deceased’s estate, the heir will be approached by the executor to make any payments to effect the transfer of the immovable property and if the heir is unable to do so without undue hardship, there is a saving grace: a Section 39(3) endorsement (Administration of Estates Act). This endorsement acts as a consent by the Master, upon application, authorising the executor of the estate to endorse the title deed to the effect that property has been inherited. This endorsement is entirely in the Master’s discretion as to whether or not it should be granted. Therefore substantial proof would have to be filed to demonstrate that the heir is not in a financial position to effect the transfer. Registration of the transfer will then take place at a future date.
However, when one purchases immovable property from a deceased’s estate, the transfer costs payable by the purchaser are identical to that of any traditional transfer. These include the conveyancer’s transfer fees, expenses incurred by the firm to register the transfer, Deeds Office fees and most importantly, Transfer Duty. Therefore, the costs payable by a purchaser when purchasing a property from a deceased’s estate has the potential to be much higher than the costs payable by an heir.
The process of inheriting a property or purchasing a property from a deceased’s estate can be extensive and at times confusing. It also has the potential to be costly, depending on the asset to liability ratio of the deceased’s estate. Your attorneys and conveyancers will guide you and keep you informed throughout the entire process and finalise these transfers in the most efficient and cost-effective way possible.
This article is a general information sheet and should not be used or relied on as legal or other professional advice. No liability can be accepted for any errors or omissions nor for any loss or damage arising from reliance upon any information herein. Always contact your legal adviser for specific and detailed advice. Errors and omissions excepted (E&OE).