Selling your home can be a pretty complicated process on its own, especially if you aren’t familiar with the steps and paperwork involved.
So, imagine if you have to sell a property that belongs to someone who has passed away… you may find yourself up against plenty of legal obstacles!
For example, a person usually cannot sign a Sales and Purchase Agreement (SPA) to sell off a property that does not belongs to him/her.
However, he/she would be allowed if granted a court order, or the permission to do so is stated within a certain legal instrument, such as a power of attorney.
PropertyGuru Tip
The power of attorney is actually the authority that’s given to someone, to act on behalf of someone else, in specific (or even all) legal and/or financial matters.
Similarly, the beneficiary cannot sign a SPA to sell the property of a deceased person, if he/she hasn’t inherited it yet. So, what can the beneficiary do in such a situation?
Well, the beneficiary can still sell the property if he/she obtains something called a grant of probate (GP) or a letter of administration (LA).
Both the GP and LA are decrees (or, also known as ‘orders’) that allows an individual to manage the deceased’s assets and liabilities that form the estate.
With a GP or LA, the executor/administrator appointed for the estate would gather the assets and liabilities, settle any debts, and distribute the assets.
If the beneficiary wishes to sell the property, he/she may consider the following options:
- To wait for the executor or administrator to transfer the property to the beneficiary. Then, the beneficiary can sell the property anytime, since it belongs to them now.
- Alternatively, have the executor or administrator to apply for a court order for a sale. From there, the property can be sold directly from the deceased’s estate to a ready buyer.
GP or LA – What’s the difference, and why does it matter?
To determine whether to apply for a GP or LA, it all depends on whether the deceased has left a Will or not:
- With a Will: You can apply for a GP from the High Court, and an executor will be appointed to carry out the wishes of the deceased under the Will. Distribution of assets would be in accordance with the terms of the Will.
- Without a Will: You need to apply for a LA so that an administrator will be appointed to oversee the deceased’s estate. The administrator would have to distribute the properties according to the proportion set by the Distribution Act 1958.
Below is a simplified table that shows some examples of how the various types of beneficiaries will receive their appropriate portions:
Surviving beneficiaries |
Proportion under Distribution Act 1958 |
|
1) Spouse and children
|
Spouse – 1/3
Children – 2/3
|
|
2) Parents, spouse and children
|
Parents – 1/4
Spouse – 1/4
Children – 1/2
|
|
3) Children only
|
Children – all (to be divided equally among the children)
|
An application for a LA can be made at the High Court, Land Office, or Amanah Raya Berhad – depending on the type of assets, and total value of the estate.
You may refer to the table provided below to better understand where to apply for a GP or LA:
With a Will
Grant of probate (GA)
High Court
- Application made under Probate and Administration Act 1959.
- Deceased has left a Will.
Without a Will
Letter of administration (LA)
High Court
- Application made under Probate and Administration Act 1959.
- Total value of assets above RM2 million.
- Require to provide 2 sureties and a bond equivalent to value of the assets. Sureties can be reduced or dispensed on application, if there is sufficient reason.
Without a Will
Letter of administration (LA)
Land Office
- Application made under Small Estates (Distribution Act 1955).
- Deceased must have immovable property.
- Total value of assets does not exceed RM2 million.
Without a Will
Letter of administration (LA)
Amanah Raya Berhad
- Application made under Public Trust Corporate Act 1955.
- Assets consist of only movable property.
- Total value of assets below RM600,000.
To recap: Upon obtaining a GP or LA, the executor or administrator would carry out the estate administration process by gathering the assets and liabilities, settling existing debts, and distributing the properties.
It’s to be noted that the distribution process only happens after having gathered all the assets and liabilities, as well as all the deceased’s debts have been settled.
Hence, if the beneficiary wishes to sell the property only AFTER it has been transferred to him/her, this may take some time, especially if it involves a large estate, or the deceased was a secretive person with many hidden assets!
On the other hand, if the property is still subject to the bank’s mortgage, the beneficiary would also have to settle the home loan first. This is known as the ‘redemption process’.
PropertyGuru Tip
The redemption process involves requesting for an official statement from the bank which issued the home loan. This statement is referred to as the ‘redemption letter’, and it lists out the total remaining amount which needs to be paid for, if the borrower wants to settle his/her loan facility.
Therefore, if the beneficiary has a ready buyer for the property but hasn’t inherited it yet, it’s always advisable for them to apply for a court order for sale so as to prevent any unwanted delays.
The purchase price from the sale would normally be sufficient to settle the home loan and above all, they get to save costs by avoiding a double transfer.
Furthermore, did you know that it can also save you on some money when it comes to the Real Property Gains Tax (RPGT)?
You see, it’ll be a longer disposal period calculated from the deceased’s date of death, rather than the date the beneficiary acquired the property. Hence, it’s always wise to plan ahead when applying for a GP or LA.
Application for Order for Sale
Under the Probate and Administration Act 1959, an executor or administrator cannot sell any property that’s still under the deceased’s estate, unless he/she obtains a court order for sale.
Such an application can be made at the High Court, and will usually be supported by relevant documents such as:
- Details of the property intending to be sold.
- Consents from all the relevant beneficiaries to sell the property.
- A copy of the SPA with the purchaser.
Upon obtaining the order for sale, the executor/administrator would have the right to sell the property, including entering into the SPA with the buyer.
The appointed individual would sign the SPA in their capacity as executor or administrator of the estate, and the money received would then be distributed to the relevant beneficiaries accordingly.
This method is also useful if the estate does not have sufficient cash flow to pay off existing debts, hence the beneficiaries may agree for the executor or administrator to sell off some properties to pay off any money owed.
Estate Administration for Muslims
In relation to estate administration for Muslims, the process is similar, except that there’s an additional requirement that’s COMPULSORY which is getting a faraid certificate.
A faraid certificate is a document that declares the deceased’s legal beneficiaries in Islam or Quranic Heirs, as well as their allocated proportion of shares under the estate.
The beneficiaries must first obtain a faraid certificate from the Shariah High Court before proceeding to apply for a GP or LA at the relevant venues as discussed above.
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Allen Khor is an advocate & solicitor in Messrs Allen Khor & Partners. His areas of practice include conveyancing, civil litigation, divorce, probate and administration. The telephone number of the firm is 012-283 0656.
Izyan Hazwani is an advocate & solicitor, as well as a Shariah practitioner at the Wilayah States in Messrs Jal & Lim. Her areas of practice include banking litigation, conveyancing, Muslims divorce and Muslims probate and administration.
*This column is for your information only and does not constitute legal advice for your specific needs. It cannot disclose all of the risks and other factors necessary to evaluate a particular situation. You should seek and obtain independent legal or professional advice for your specific needs and situation.