Real estate properties in probate proceedings are often at the center of a lot of drama.
By its nature, real property is often of higher value than most estate assets and are therefore hot for potential adverse claims. Emotions may also play a role – especially if it has served as a home for a family or the headquarters of a business. Creditors looking to be paid often place liens on real estate as collateral. It is a tangible asset with significant monetary value so the probability for conflict is high.
This is also the reason why a lot of disputes center around real property. If it is determined that the sale of real property is necessary, the sale may be blocked by any number of situations: family members may be occupying the property and refuse to move out; the personal representative may refuse or delay selling, either because he or she is occupying the property or because the property has sentimental value to the family; family members may want a higher price for the property vis-à-vis the sale price; or there is a defect or cloud on the title that delays the sale process.
Compelling the Personal Representative to Act
Sometimes the personal representative may be the main obstacle to a real property sale. They may be occupying the property or just don’t want to sell the property outside of the family. They may drag their heels on the sale until it becomes undeniable that the delay is only causing harm to the estate.
The remedy here is for any interested person to compel a sale under Probate Code §10001.
These contemplate various scenarios where a sale is necessary:
- to pay debts, family allowance, expenses of administration, or taxes;
- it is to the advantage of the estate and in the best interests of the interested persons; or
- the will directed that the property be sold
The petitioner under Probate Code §10001 needs to prove any of the above instances, and that proper notice has been given. The court can then order the personal representative to sell the property, ensuring the protection of the estate.
Resolving Temporary Possession
Under Probate Code §6500, until the inventory is filed and for a period of 60 days thereafter, the surviving spouse and minor children of the decedent may remain in possession of the family dwelling.
This necessarily presents a challenge when the need to sell the family dwelling arises.
The need or the desire of the family members to stay in their home must be balanced by the need to sell the property to pay off the estate obligations. If this cannot be resolved informally by the parties, then it is the duty of the court to balance the competing interests to resolve the matter. This issue is typically raised in a petition brought by the personal representative to modify or terminate the temporary possession granted under Probate Code §6500.
The same principles also holds true if the persons in possession of the property are “strangers” to the estate – for instance, tenants, caretakers, long-term guests, co-owners on title, maybe even agents under a previous power of attorney.
The issue may not be as directly conflicting as the right of the surviving family to occupy a family dwelling, but the possession of the occupants must be resolved before the property can be sold. The court must arrive at a finding that the occupants don’t have a right to possession of the property, and order their removal.
Once this order is enforced, the sale can proceed.
Needless to say, in this type of dispute, it is highly recommended that the personal representative seek the services of a probate dispute lawyer to recover possession of the property.
The §850 Petition to Resolve Title Clouds
A “cloud” on title is anything that may impair or call into question the validity of title, ownership, or the ability to transfer property free and clear of liens or other encumbrances. It arises from any claim, defect, or unresolved interest that affects the marketability of the property. If there are competing claims, defective documentation, or other issues that create uncertainty as to who holds valid title, a cloud exists that must be resolved before the property can be sold.
Some examples include unresolved liens, community property claims, adverse ownership claims, adverse possession claims, even transfers of the property that occurred immediately before death, under a questionable power of attorney, might give any purchaser pause.
When there is a cloud on the title of real property, it is a lot harder to sell. The property may become undervalued, or prospective purchasers may simply walk away from a sale if the property’s title is questionable.
Needless to say, the probate cannot close if probate real property has a cloud on its title, negating the initial directive to the personal representative to consolidate and preserve estate assets. If it is determined that the property needs to be sold to pay off estate obligations, then the probate process might need to pause while the cloud on the property’s title is resolved.
The method for doing so is a petition under Probate Code §850, where the personal representative can petition the court to make a finding with respect to disputed titles of real property including:
- where the decedent died in possession of, or holding title to, real property that is adversely claimed by another;
- where the decedent is claiming title or possession of real property held by another; or
- where the decedent, during his lifetime, promised to transfer or convey real property to another upon or after his death, and the issue of whether this is enforceable
Title clouds are typically only resolved by a court order, after the usual court proceedings where evidence is presented by both sides to support their claims.
In any case, a court decision on a §850 petition will resolve the title to real property either way, and either the adverse claimant is granted ownership or possession of the property, or the personal representative is finally able to proceed with the sale.
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If you are a personal representative intending to sell estate real property, you may encounter obstacles or challenges that prevent you from proceeding with the sale. In many cases, these issues require legal action to resolve before the transaction can move forward. We highly recommend seeking the services of a qualified probate dispute attorney who can guide you through the legal remedies available based on your specific circumstances.