In the event that an owner passes at any stage prior to settlement, the sale process will stall until probate is granted.
This is the case even in the instance where a power of attorney has been appointed (as the authority to act on the donor’s behalf does not endure past death). Upon death, the authority to act shifts to the executor of the estate, but only once probate is granted. Though executors have some discretionary deference granted to them, it is insufficient to effect a sale, so there is a period of pause.
This means, without a provision to the contrary, the minimum risk is that penalty interest for failing to settle on time will be applied. This exposure is useful to be mindful of when acting for elderly or unwell clients, as a simple provision can be made in the contract to minimise the risk of such a penalty for late settlement falling on the owner's estate when it is finally able to settle.
A clause should be inserted into the sale and purchase agreement providing that in the event of the proprietor’s passing, settlement would become the date agreed, or 10 working days after probate is issued, whichever is later.
(If the proprietor passes prior to there being a contract for sale in place at all, then the property may well be best withdrawn from the market until probate is granted, or the executor may request that it remains on the market, however the agent should seek instructions from their branch manager around this, as the person with whom the agency exists will have passed away.)
This absence of authority to act can come as a bit of a shock to most children acting as their parents power of attorney, as given they are described as 'enduring' powers of attorney, they understandably often presume the authority to act endures after death.
It is arguably incumbent on the agent selling a property to consider the inclusion of the deferred settlement clause in the instance where a client is very elderly, unwell, or has a power of attorney acting on their behalf.
A common question is, what happens if settlement pushes out as per the inserted term, and the buyer’s situation changes due to the delay and they say they cannot settle? There are provisions for a buyer failing to settle in the standard contract and they don’t alter in this instance.
The estate is generally able to keep the deposit that was paid when the property was declared unconditional. This should always be the case however the amount is capped to 10% in the standard terms. So in the instance that a larger deposit was taken, if the agent omitted to alter a term further in the contract that amends the 10% being the maximum retainable deposit amount, anything more than the 10% to hand will be required to be refunded.
The agency fees are paid from the purchaser’s deposit virtually all the time, so that will affect what the estate receives. From there, as the buyer still has a duty to proceed, the property would potentially be re-marketed, and the prior buyers, presuming they are solvent, may then pursued for any difference between the new price achieved and the original contract price
Thankfully probate is being achieved reasonably speedily (circa 3 weeks as of November 2024) so the timeframe is currently unlikely to be sufficient to materially increase the risk of a buyer failing to settle.