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Executor Sold Property Undervalue

The executor of a person’s will is responsible for administering the deceased estate. This often involves paying outstanding debts and distributing funds and property. If the deceased owned real estate and there is more than one beneficiary, this may mean selling the real estate in order to divide its value between parties. An executor has a duty to administer the estate in the best interests of the beneficiaries, which includes selling real estate for a reasonable price. But what happens if the executor sold property undervalue? This article outlines what beneficiaries or other interested parties can do if it comes to light that the executor has sold real estate for less than it was worth.

Can an executor sell property of the estate?

After an executor has obtained a Grant of Probate, they may sell real estate and other property belonging to the deceased estate if necessary. The executor must ensure that any sale is conducted transparently. This includes keeping a meticulous account of all transactions. The executor must obtain multiple quotes for any repairs needed to the property and a valuation of the property.

The executor has a duty to ensure that a property is not sold below market value. Properties from deceased estates have often been lived in for many years so extensive repairs and renovations may be necessary on order to obtain the best price.

Who decides whether to sell the property?

If the will of the deceased does not refer to the sale of real estate, the decision as to whether to sell the property must be made by the executor after getting a Grant of Probate.

Selling real estate is generally preferable to retaining it as disputes may arise as to its value if there is no sale.

Deceased estate properties are often sold at auction as this provides a transparent process that rarely leads to challenges.

The executor’s year

Executors are required to finalise deceased estates within a reasonable time of the deceased’s death. A reasonable time is generally considered to be 12 months. This if often called ‘the executor’s year’.

If the sale of a property is likely to take longer than 12 months, the executor should seek legal and financial advice about this.

Holding Executor accountable for selling property undervalue

If an executor sold property undervalue and therefore acted against the best interests of the beneficiaries, they can be held personally accountable. In very serious cases, an executor can even be removed from their position for misconduct.  Courts can also order executors to furnish accounts of their administration of the estate or order them to do or refrain from doing certain acts in relation to the estate.

Booth v Public Trustee

The most well-known Australian court decision about an executor who sold a property undervalue in the 1953 Victorian Supreme Court decision of Booth v Public Trustee.

In that case, the testatrix specified in her will that her son, B, was to be allowed to live rent-free in her house in Moonee Ponds for a period of 12 months after her death. The will further provided that B was to have the option of purchasing the house at a price determined by ‘a sworn valuator appointed by my trustees’ after that 12-month period had expired.

The residuary of the testatrix’s estate was to be divided between her five children, including B.

The executors and trustees of the estate were B and W.

B exercised the option to purchase the property at a price set by a valuer the Public Trustee had appointed and sought to transfer the property to himself. The other beneficiaries subsequently lodged a caveat and sought that the transfer be set aside, claiming that the option in the will had not been validly exercised.

The court found in the plaintiffs’ favour. As the valuation had been obtained by the Public Trustee prior to the Grant of Probate, the valuator was not appointed by the trustees acting in their capacity as trustees and executors as stipulated in the will. The appointment of the valuator was therefore ineffectual in law and a breach of the trust.

The court found that the house was still held by the trustees and subject to the directions in the will and issued an injunction restraining B from proceeding with the transfer of the property.

Seek legal advice if executor sold property undervalue

If you are involved in a matter where the executor sold property undervalue or you are concerned that the executor may do so, seek legal advice from our contested estate lawyers as soon as possible. Whether you are a beneficiary or another interested party, our contested estate lawyers can give you comprehensive and timely advice so that you are well aware of all your options.

If you require legal advice or representation in any legal matter, please contact Armstrong Legal.

Fernanda Dahlstrom

This article was written by Fernanda Dahlstrom

Fernanda Dahlstrom has a Bachelor of Laws, a Bachelor of Arts and a Graduate Diploma in Legal Practice. She has also completed a Master’s in Writing and Literature. Fernanda practised law for eight years, working in criminal defence, child protection and domestic violence law in the Northern Territory and in family law in Queensland.

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