When a Seller Dies Before Closing

A Realtor asked me this recently:

What happens if a seller dies after the APS is signed but before closing?

It's one of those scenarios that feels unlikely until it happens on your file. And when it does, the answer depends on a few things.

Here are the three (3) scenarios:

1) There's a joint tenant on title.

This is best-case scenario for the transaction.

When property is held as joint tenants, the right of survivorship means the deceased's interest automatically goes to the surviving owner(s). No court process. No probate.

From there, the surviving owner(s) can execute the transfer and close the deal. In most cases, the original closing date is still possible.

There's a little paperwork involved, but nothing that would cause a significant delay.

2) Property is exempt from probate.

If there are no joint tenants, the next question is whether the property qualifies for something called the First Dealings Exemption.

This is a provision in Ontario's land registration system that allows certain properties to be transferred without going through probate.

The easiest way to explain it... if a property was purchased in the 1990s or earlier and was never sold, it might qualify.

I actually recorded a full video on the exemption this week if you want to understand how it works.

If the property qualifies, the estate trustee named in the will can work with a real estate lawyer to complete the sale without waiting on probate.

With a cooperative trustee and proper legal support, the deal has a chance to close on time.

3) Probate is required.

This is where things slow down considerably.

If the property doesn't qualify for the exemption and there's no surviving joint tenant(s), the estate will need to go through probate before anyone has the legal authority to sell.

That process takes time, and the chances are slim that the estate will be in a position to close on the original date.

At that point, the parties have a few options:

• They can agree to extend the closing date by mutual agreement.
• They can sign a mutual release and walk away from the deal.
• Or, if the estate can't close on time, the buyer may have a claim for damages.

None of those are ideal. But that's the reality when probate is the only path forward.

Latest YouTube Video:
First Dealings Exemption