A post from The Landlord Law Blog:
Here is a question to the blog clinic ‘fast track’ from Kevin (not his real name) who is a landlord.
My parents gifted me their house in 2012 and at the time there was a Tenancy agreement setup as advised for a fixed period of 10 years for a nominal rent of £10.00 a year. This was only done so they could live there without worry and do so for as long as they wished.
They both passed away recently. Now my brother is in a dispute with me they saying the tenancy has not ended and it belongs to the estate under the will and that I as an executor should rent the house out at commercial rent and give him 50% of the share. There is no mention of the tenancy it in the will.
Could you please explain as I have read in one of your blogs that a fixed term tenancy does not end at death and whether this would this apply here.
I have also read that If a fixed term tenancy and the fixed term has not expired, the executors will arrange for it to be passed onto whoever is left the tenancy in the will. Yet there is no mention of it in the will as my parents knew the real purpose of the tenancy.
Any advice would be appreciated.
I should start by saying that I am not and never have been a trust and probate lawyer and I think you should consult one about the situation. Note also that I do not do tax law and cannot, therefore, comment on any tax implications.
However. This is how I see it.
Is it a tenancy and if so what type of tenancy?
You are the owner of the house and the tenancy was between you and your parents. As the rent was £10 per year, it would not have been an assured shorthold tenancy. This is because in Schedule 1 of the Housing Act 1988 tenancies with a rent of under £250 are excluded from protection under the act and it will, therefore, be an unregulated ‘common law’ tenancy.
Sometimes, when property is let in family situations, there is no legal tenancy at all – as a court will hold that there was ‘no intention to create legal relations’. It is difficult to say whether or not this will apply in your case as it appears that a formal tenancy agreement was drawn up under advice.
You don’t say whose advice it was or give any details of what is set out in that tenancy agreement. You need to get hold of it and read it, as it may say something about the intentions of the agreement and what should happen after the death of the tenants.
If it is not an actual tenancy (because as a family arrangement there is no intention to create legal relations), then the agreement will probably have ended on the death of your parents. However, the existence of a written document indicates that it is probably a legal tenancy.
If it is a tenancy – what happens to it now?
Assuming it is a tenancy and the tenancy agreement is unhelpful, then the tenancy will continue (your brother is right there) and is owned at the moment by the executors. It will then pass to whoever is the residual beneficiary under your parent’s estate.
If the tenancy is not ended by the executors, the residual beneficiary will (when the tenancy is passed to him or her) be entitled to live in the property for the remainder of the 10-year term at an annual rent of £10. It is possible that they may also be able to sublet it at a commercial rent – but that will depend on the terms of the tenancy agreement.
A few comments
I cannot see any justification for your brother’s request that you re-let the property at a commercial rent. The property is yours. It is only the £10 pa tenancy which belongs to the estate.
It may be that your brother is expecting you as executor to sublet the property to get an income for the estate. Again this will depend on the terms of the tenancy. My feeling is that as the sole purpose of the tenancy was to give security for your parents in their final years, this is probably not something which can be done. But this will depend on what the tenancy agreement actually says.
A reason why the estate may consider it unwise to do this (even if the terms of the tenancy permit) is because the estate will be liable to you as landlord for any repair work.
This is because, as the fixed term of the tenancy is more than seven years, the tenant (ie the estate) is liable to you (as landlord) for all repair work. This is because the statutory repairing covenants under s11 of the Landlord & Tenant Act 1985 that apply to most short term tenancy agreements will not apply to a tenancy with a fixed term of 7 or more years.
If (for example) the property is in a poor state of repair, and you (as landlord) agree to waive this, this could be justification for ending the tenancy now. However, the estate could incur a considerable liability to you as landlord if sub-tenants are taken on who cause damage to the property.
Once the fixed term has ended, you as the landlord will be able to recover possession.
Can you agree with yourself to end the tenancy now?
If there is no-one who wishes to live in the property under the £10 pa tenancy (presumably your brother has his own home) then I don’t see why you shouldn’t agree (as the executor) with yourself (as the landlord) to end the tenancy now.
But whether you are entitled to do that if one of the beneficiaries objects is entering into the sphere of trust and probate law and so I will leave it to any trust and probate lawyers reading this to answer that question.
The post Can this tenancy between the executor and his deceased parents be ended now? appeared first on The Landlord Law Blog.