This feels slightly macabre, but I am preparing my will and my thoughts have turned to what will happen to my portfolio when I pass away. I purchased a few properties that I wish to leave to my children, is there anything I need to do in addition to preparing my will?
Hopefully this won't be an issue that arises for a long time yet, but it's always a good idea to be well prepared - your tenants will certainly thank you for having everything in hand.
Additionally, your son and daughter will no doubt be pleased that you are putting so much consideration into the task that faces them. Whilst you are no doubt a seasoned landlord, they might not be so well-informed, and it might be a little daunting for them, especially at such an emotional time.
Data from HMRC suggests that there are 1.75m private sector landlords in the UK, with 11% believed to be ‘accidental landlords’ by way of inheritance.
In the initail stages, until your estate has passed through the probate stage, your executors (usually your solicitors) will be acting as ‘interim landlords’ and should notify your tenants of the situation. As bank accounts are frozen at this stage, rent will usually be paid into the executor’s holding account, and held until probate is complete, when it is divided amongst the benefactors as per your will’s requirements.
Once probate is complete, your son and daughter should make sure that they contact your existing tenants as soon as possible, letting them know that your solicitors are no longer their point of contact.
Making amendments to the tenancy agreement should be the next step, ensuring that the new landlord’s details are now in place – this is a legal document, and if the wrong details are on this, and your children ever need to rely on it to help them serve notice on a tenant, they will be left in a very weak position.
Your son and daughter will have to register the properties in their names at the land registry in order to make sure they have the proof of ownership – this will ensure that moving forward it is straightforward for them to deal with any issues concerning the property.
Another very important item on their ‘to do’ list should be making sure that they have appropriate landlord’s insurance. Normal home owner’s insurance won’t cover the portfolio, and the insurance you may have had would have been attributed to you personally, not the properties.
If your children don’t wish to take on the responsibility associated with your property portfolio and wish to sell the properties, the legal rights of your existing tenants must be considered before any changes are made. It is not as simple as issuing as section 21 notice when it comes to evicting a tenant living in a property that was secured through inheritance, as the original agreement was not made with the evicting landlord, so each case should be approached individually and considered with a legal professional.
Alternatively, many landlords are keen to purchase properties with sitting tenants, although this type of transaction are not supported by mortgage companies, so can only be made via a cash purchase.
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