Dealing with Real Estate Owned by an Estate in NYC
When the concept of an estate comes to mind, the first picture that pops up is typically a home owned by the decedent during their life. Whether the property is multifamily home, condo, co-op, or a seasonal home in Boca Raton, all real estate must be included in that person’s estate upon his or her death (subject to certain exceptions mentioned below). After you account for the real estate, you must then determine how to best accomplish your end goal of selling the property, transferring title to a beneficiary, or negotiating a buy out of your or someone else’s share in the property. In a NY probate proceeding, where the will of the deceased leaves the real estate to only one beneficiary, or in an NY administration (no will) where the deceased only has one heir remaining who is entitled to inherit entire estate, the task of what to do with the real estate becomes an easy one. However, when more than one person stands to inherit the real property belonging to the estate, problems quickly develop. Disputes and resolutions come in a couple of different forms. The following is a couple of ways you can resolve differences involving real property of the estate:
Jointly Held Real Estate
If the title to the real estate is in decedent’s name alone, then that property is part of the probate estate. However, if the deed is held by a Trust, or the deed reveals an additional owner, then we must carefully examine the situation to determine how to proceed. If property was transferred into a trust during the life of the person now deceased, that property belongs to the trust and only the named trustee can sell or distribute the parcel based on the terms of the trust. The property is not included in the NY probate or administration petition. The executor of the estate has no say in its distribution. The trust governs how that piece of property passes and to who.
In the instance where the deed shows an additional owner, the language of the deed must be carefully read. Does the deed include “right of survivorship” language? For example, “Anna Smith and Ken Smith as joint tenants with right of survivorship.” In this situation, title passes to the remaining owner left standing upon the other’s death. Here, if Anna died before Ken, he becomes the 100% owner of the property. The real estate does not pass through probate. Anna’s heirs have to no claim to the property. It is now owned by Ken outright.
If the right of survivorship language is absent in the deed, but the property is still held by two or more people, including the decedent, it must be included in the NY probate estate. The share belonging to the decedent, whether it be fifty percent or less, passes according to the last will and testament or by New York intestacy rules (no will). In this situation, the executor or administrator is presented with three options. Option one, sell the property and split the proceeds between the interested parties. For example, Anna Smith and Ken Smith hold title to a Midtown brownstone as joint tenants, each having a 50% share. Anna dies leaving a will which dictates that her entire estate should pass to the animal advocacy charity by the name of PETA. The charity now has a 50% interest in the brownstone, and they demand that the brownstone be sold so they can gain capital to open a lamb sanctuary in India. The executor must sell the brownstone and issue a check to Ken for half of the proceeds and the remaining half to PETA. In the alternative, to avoid shaving to sell, Ken can offer to buy out PETA’s share in the real property. PETA can also buy out Ken out of his share if he agrees. If the parties are not interested in a buy out or cannot agree, the brownstone must be sold on the market by the executor or administrator of the estate.
Selling Real Estate
An executor or administrator of an estate does not have an abundance of options when it comes to real property belonging to an estate. The executor can sell the property for the benefit of the estate or the beneficiary, or negotiate an ownership interest buy out. If there are two or more interested parties, and one refuses to sell, the party wanting to sell must initiate an action in Surrogate’s Court. Before commencing an action, the party should see if the other parties are willing to join together to voluntarily sell the property on the market. If parties can agree without involving the court, a considerable amount of time and money can be saved on on court filing fees and legal fees. If they are in agreement, a settlement agreement can be drafted outlining all terms of the sale. The executor can then retain a real estate broker and split the proceeds accordingly upon the sale.
In an often too common situation such as when parties cannot agree to terms, or someone refuses to sell, a court action must be filed. In NY Surrogate’s Court, the action to compel a sale is called a “disposition.” A party can refuse to sell for as long as they like, but the fact of the matter is that the property must be sold once a judge rules on the action. There is no way around it. The judge will order that the property be sold at an auction or by a broker of the executor’s choice.
Purchasing a Beneficiary’s Share in the Real Property
If you want to sell your share in the property to a beneficiary or an heir of the deceased, the quickest way to assure a sale is to typically have the property appraised. You want to first get a feel for what the property could sell for on the market. Once you receive the appraisal report, you can calculate your asking price. For example, Paul and Jon each own a one-half interest in a commercial building in the Bronx. Jon dies, and his estate wants the property sold so they can collect on his share. Paul offers to purchase the estate’s share in the building and they agree. The appraisal report reveals the fair market value of the property as $1,000,000.00. To avoid broker fees, closing fees, and delay, the estate agrees to a sale price of 450k. Paul saves 50k and all parties are happy.
If you have an interest in a real property belonging to a NY estate, whether you are a beneficiary, heir, executor or administrator, and need the property sold or want to negotiate a buy out of a share, contact us immediately 646) 233-0826. We handle estate matters in Manhattan, Brooklyn, Bronx, Queens, Staten Island and Long Island.
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