Few landlords have a plan in place for what happens if the landlord dies unexpectedly.
For many families, picking up the pieces of a buy to let business run by a solo landlord is almost impossible.
Stop and think for a moment about who else other than you knows your rental property addresses, mortgage details, how much rent you charge and the state of any repairs that need completing.
Unless you have a partner helping in the business, the answer is probably no one.
As the COVID-19 pandemic has shown, death can strike anyone at any time, and it’s vital to have a plan to fall back on should the worst happen – which it surely will sooner or later.
- 1 Appointing A Buy To Let Executor
- 2 The Landlord Emergency Pack
- 3 Can Landlords Write Their Wills?
- 4 What Happens To Tenants If Their Landlord Dies?
- 5 Landlord Dies Without A Will
- 6 What Happens If A Landlord Dies Unexpectedly? FAQ
- 6.1 Will lenders transfer mortgages to new owners when a landlord dies?
- 6.2 I have a joint mortgage, and my partner has died
- 6.3 Will I pay capital gains tax on inherited buy to lets?
- 6.4 My landlord died and I don’t know who the new owner is
- 6.5 What’s the timescale for sorting out a property when someone dies?
Appointing A Buy To Let Executor
Any business needs a key strategy that rolls into place on the death of someone whose skills are essential to maintaining cash flow.
A property business is no different.
A will should take over when a landlord unexpectedly dies. The will should name an executor who takes on running the buy to let business.
After all, the landlord may have a partner and children who depend on the monthly rents for their well being.
A will often names the executor, who is responsible for passing on a deceased’s estate. An executor can be a friend or relative, or a property professional. Landlords can have many executors, but it’s best to keep things simple by appointing no more than two.
After the death of a landlord, the executor should ensure the rental business carries on as usual. That includes collecting rents, paying the bills and carrying out any repairs.
The executor also applies for probate, which is legal permission to deal with someone else’s estate.
The Landlord Emergency Pack
The landlord should put together an emergency pack for the executor, which includes:
- Property addresses and a set of keys for each
- Mortgage lender name, account numbers and any outstanding loan amounts
- Copies of property and other business insurance policies, name of insurer, account numbers and renewal dates
- Details of accounts with official bodies, such as the local authority for council tax, suppliers of water, gas and electricity etc
- Name and address of the landlord’s accountant
- Copies of tenancy agreements with tenant details, current rents, due dates, tenancy end dates and any statement of arrears
- Details of any tenancy deposits and dates mandatory information like the How to Rent guide, gas and electrical safety certificates were served and when they are next due.
- Names and contacts details for any joint owners
- Names and contact details of any trusted tradesmen
Can Landlords Write Their Wills?
There’s no legal reason why a landlord cannot write a will, but it’s better to consult a solicitor in some complicated cases like these:
- You have remarried but have children from a previous marriage
- You have property outside the UK
- You run a business
- Your net worth is more than inheritance tax thresholds
Once written, give the executor a copy of the will and your emergency pack, and tell them where you keep the originals.
What Happens To Tenants If Their Landlord Dies?
Legally, the tenancy does not die with the landlord but becomes part of their estate.
The executor should continue managing the tenancy during probate then sell or pass the property on as the will directs.
Nothing changes for the tenant:
- If the tenancy is over a fixed term, the terms in the tenancy agreement still stand
- If the tenancy is a rolling, periodic arrangement, the tenant must give one month’s notice to quit, while the executor should provide two months’ notice (or longer depending on any Coronavirus provisions that may apply).
- Probate generally takes a few months to sort out, so tenants and the new owners have plenty of time to make any decisions about their futures.
- Tenants must carry on paying rent
- Deposits stay protected if they are already in an approved protection scheme
If the executor has instructions to sell a buy to let property with tenants, the estate can issue a Section 21 no-fault eviction notice.
Landlord Dies Without A Will
If a landlord dies without a will, they die intestate. When this happens, the law has a strict set of rules determining who inherits from the estate.
The death does not mean the tenancy ends or that tenants should stop paying their rent.
A personal representative should be appointed to manage the estate, including any rented homes.
This representative should write to the tenants advising them of what has happened and how they should pay their rent.
The personal representative does the same job as the executor during probate.
What Happens If A Landlord Dies Unexpectedly? FAQ
Will lenders transfer mortgages to new owners when a landlord dies?
The new owners can ask, but the answer is likely to be no.
If a buy to let has a mortgage when the owner dies, the estate pays the debt.
If the estate does not have enough cash to pay, the new owners sell or remortgage the property to clear the debt.
One way to avoid this issue is to take out life insurance that covers the mortgage debt.
I have a joint mortgage, and my partner has died
The lender will want the loan repaying if your partner has died, leaving a debt. If you struggle to pay, speak to the lender about extending the term or consider selling the property.
Will I pay capital gains tax on inherited buy to lets?
Yes, but you only pay capital gains tax based on your inherited value – the former owner’s tax debt dies with them.
If you decide to sell after you inherit, it’s unlikely you will have a CGT bill unless the property price has gone up by more than the annual exempt amount – currently £12,300 until April 2025.
My landlord died and I don’t know who the new owner is
You can download a copy of the title plan and register for your home from the Land Registry website.
The documents cost £3 each. The title will list the name and address of the owner. If that’s still the deceased landlord, write to the old address as the letter will probably forward to the executor.
What’s the timescale for sorting out a property when someone dies?
When the landlord dies, there’s no timescale attached to selling or passing on a buy to let property.
Most lenders and other official bodies respect the family is dealing with a bereavement and may need time to tackle their finances.