Rental Property in Probate: Four Important Considerations
The Ohio probate process can be daunting to navigate at the best of times, but when the estate includes rental property, the process becomes even more complex. If you are serving as executor or personal representative of an Ohio estate that includes income property, there are some important factors you must take into account. Here are some things you need to consider if you are dealing with rental property in probate.
Consideration #1: How the Property was Titled
If the deceased owned rental property, you, as executor, may need to step in and take action regarding the property, but this depends on how the property was held. If the property was held in trust, it will not need to go through probate at all, and will be managed by the named trustee.
If the property was not held in trust, but was held jointly with another person, the form of ownership will be important in determining what happens next. If the property was held as joint tenants with rights of survivorship, it will not go through probate. The surviving joint tenant(s) will automatically take the deceased person's interest in the property. If the property was held as tenants-in-common, there is no right of survivorship. The decedent's interest in the property must go through probate. Often, the surviving tenants-in-common will want to buy the decedent's interest. If not, the decedent's heirs will inherit the decedent's interest in the property.
If the decedent owned the property in his or her sole name, not in trust or jointly with another person, the property will need to go through probate.
Consideration #2: Where the Property is Located
Assuming that the property does need to go through probate, its location will determine where it goes through probate. If the deceased person lived in Ohio, but the rental property was located out of state, then an auxiliary probate proceeding may have to be opened in that state.
Be aware that the other state will have its own laws regarding what out-of-state executors are permitted to do. You may, for example, have to appoint an agent who resides in the other state to accept service of any legal papers involved in the probate process. While you may be able to use a non-professional for this purpose, such as a family member or friend, it may be wisest to use an attorney or other legal professional who is familiar with the local probate laws.
Consideration #3: Who Has Authority to Manage Property
Under Ohio law, if, within a reasonable period of time after the appointment of an executor or administrator, no one in authority has taken over management and rental of the property, the executor or administrator may apply to the court to assume those duties. An heir may also apply to the court to have the executor take over management of the rental property.
The application must describe the facts that are the basis for the application, as well as a description of the real property and the decedent's interest in it and the names and addresses of those who will inherit the property, if known. Those people must be notified of a hearing on the application unless the court has a good reason to dispense with notice.
The court will grant the application if it finds the facts stated in it to be true, and that it would be in the best interests of the heirs or devisees (people to whom the will leaves the property) for the applicant to manage the property. The court may require the executor or administrator to post bond.
Consideration #4: Duties and Authority of an Executor Managing Rental Property
Once it is established that you, as executor, are responsible for managing the rental property in probate, what exactly are your duties, and what are you authorized to do?
First and foremost, to collect rent on the property, so that necessary expenses can be paid. These expenses include taxes, assessments, and operating expenses. Managing the property also means making necessary repairs, though if a repair costs in excess of one hundred dollars, prior court approval is necessary. The executor can also use rental income to insure the rental property against loss by fire or other casualty and against public liability.
As executor, you are authorized to rent the property out on a month-to-month basis, or on a longer basis (no longer than a year) with court approval. If the property is broken into, you have standing to take legal action.
Last but not least, you are obligated to pay, at least annually, to the heirs or devisees the share of the net rents to which they are entitled. You are also obligated to account in writing for all income from and expenditures for the rental property on a separate schedule within the accounts you are required to file with the probate court.
As executor, you are entitled to reasonable payment for your work in administering the estate. If you perform extraordinary services in the management of rental property in probate, you may apply to the probate court for payment for these services. To the extent that you need the services of an attorney in managing the property, you may also apply to the probate court for payment of attorney fees. Both payment for extraordinary services in connection with managing the property and attorney fees for managing the property are charged against the property's rents, if those are sufficient. If not, the payments will be a charge against the real property itself.
If you are concerned about the requirements of managing real property in probate, consult an experienced Ohio probate attorney for guidance.
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