The purpose of this article is to present a summary of solutions to issues that arise when real property of a decedent is being conveyed during the pendancy of the estate administration. We will discuss some statutory provisions that present methods of dealing with these issues in ways that may be helpful in moving toward closing in as expeditious a manner as possible. The estate administration procedures are set forth in Chapter 28A of the North Carolina General Statutes and we will include pertinent text for reference purposes where it may be helpful.
It is not at all uncommon for a property owner to pass away after signing a real property sales contract but prior to closing. It is not unusual in such circumstances for the decedent to be intestate or if a will is probated it may not contain an adequate power of sale for the personal representative. The pending contract is essentially a claim against the estate and the general fiduciary power ought to be adequate to deal with the situation.
However § 28A-17-9 provides express authority in order to convey the property without a court order.
"When any decedent has contracted to sell any real property and has given bond or other enforceable written contract to the purchaser to convey the same, his personal representative may execute and deliver a deed to such real property and such deed shall convey the title as fully as if it had been executed and delivered by the decedent. No deed shall be made unless the purchaser complies with the terms of the bond or other written contract. If the contract for conveyance requires the giving of a warranty deed, the deed given by the personal representative shall contain such warranties as required by the contract and the warranties shall be binding on the estate and not on the personal representative personally."
A more common issue occurs when the will of the decedent provides specific authority to sell and some or all of the beneficiaries can not conveniently execute the closing documents. In such cases § 28A-17-8 authorizes the personal representative to act. The November 1995 issue of our newsletter explores the issues of what language constitutes an adequate power of sale. The statute contains broad discretionary authority unless the will limits the power and is set forth as follows:
"Sales of real property made pursuant to authority given by will may be either public or private, unless the will otherwise directs, and may be on such terms as in the opinion of the personal representative are most advantageous to those interested in the decedent's estate."
When real property is conveyed to the personal representative as fiduciary under the terms of the decedents will, assuming no specific sale power or distribution directive, § 28A-17-10 provides authority to sell. The statute, set forth below, could be clearer.
"When real property is conveyed to a personal representative for the benefit of the estate he represents, he or any successor personal representative may sell and convey it upon such terms as he may deem just and for the advantage of the estate. The procedure shall be as is provided in Article 29A of Chapter 1 of the General Statutes, entitled "Judicial Sales." If it is made to appear to the clerk of superior court by petition and by satisfactory proof that it will be for the best interest of the estate to sell by private sale, the clerk may authorize a private sale in accordance with the provisions of G.S. 1-339.33 through 1-339.40."
The statute requires the personal representative to use the procedure specified in Article 29A of Chapter 1 which speaks to sales based upon the order of a judicial authority. However the wording "upon such terms as he may deem just and for the advantage of the estate" clearly seems to indicate a discretionary power. It would be logical to assume that it should not be necessary to seek an order unless a private sale is planned but prudence would dictate otherwise.
Absent a directive or authority granted in a will the personal representative may sell real property of the decedent in order to pay debts. In order to accomplish this the personal representative must initiate a special proceeding. The statutes are self explanatory.
§ 28A-17-1. Sales of real property
Pursuant to authority contained in G.S. 28A-15-1 the personal representative may, at any time, apply to the clerk of superior court of the county where the decedent's real property or some part thereof is situated, by petition, to sell such real property for the payment of debts and other claims against the decedent's estate.
§ 28A-17-2. Contents of petition for sale
The petition to sell real property shall include:
(1) A description of the real property and interest therein sought to be sold;
(2) The names, ages and addresses, if known, of the devisees and heirs of the decedent;
(3) A statement that the personal representative has determined that it is in the best interest of the administration of the estate to sell the real property sought to be sold.
§ 28A-17-4. Heirs and devisees necessary parties
No order to sell real property shall be granted until the heirs and devisees of the decedent have been made parties to the proceeding by service of summons in the manner required by law. Upon such service, the court shall appoint a guardian ad litem for heirs and devisees who are unknown or whose addresses are unknown, and summons shall issue to him as such. The guardian ad litem shall file answer for such heirs and devisees and defend for them, and he shall be paid such sum as the court may fix, to be paid as costs of the proceeding.
§ 28A-17-6. Adverse claimant to be heard; procedure
When the real property sought to be sold, or any interest therein, is claimed by another person, such claimant may be made a party to the proceeding, and in any event may become a party upon his own motion. When an issue of law or fact is joined between the parties, the procedure shall be as prescribed for other special proceedings.
§ 28A-17-7. Order granted if petition not denied; public or private sale; procedure for sale
If, by default or admission, the allegations in the petition are not controverted, the clerk of superior court may summarily order a sale. The procedure for the sale shall be as is provided in Article 29A of Chapter 1 of the General Statutes, entitled "Judicial Sales." If it is made to appear to the clerk by petition and by satisfactory proof that it will be for the best interest of the estate to sell by private sale, the clerk may authorize a private sale in accordance with the provisions of G.S. 1-339.33 through 1-339.40.
If the personal representative plans to sell an undivided interest in real property the following applies:
§ 28A-17-3. Petition for partition
When it is alleged that the real property of the decedent sought to be sold consists in whole or in part of an undivided interest in real property, the personal representative of the decedent may include, in the petition to sell the real property for the payment of debts and other claims against the decedent's estate, a request for partition of the lands sought to be sold.
If the persons inheriting the real property desire to sell or mortgage it during the pendancy of the administration the personal representative must join in the execution of the conveyance pursuant to § 28A-17-12. But note that under subsection (b) a conveyance by heirs more than two years after death without publication conveys good title without joinder by the personal representative.
(a) If the first publication or posting of the general notice to creditors as provided for in > G.S. 28A-14-1 occurs within two years after the death of the decedent:
(1) All sales, leases or mortgages of real property by heirs or devisees of any resident or nonresident decedent made after the death of the decedent and before the first publication or posting of the general notice to creditors are void as to creditors and personal representatives; and
(2) All sales, leases or mortgages of real property by heirs or devisees of any resident or nonresident decedent made after such first publication or posting and before approval of the final account shall be void as to creditors and personal representatives unless the personal representative joins in the sale, lease or mortgage.
(b) If the first publication or posting of the general notice to creditors as provided for in G.S. 28A-14-1 does not occur within two years after the death of the decedent, all sales, leases or mortgages of real property by heirs or devisees of any resident or nonresident decedent shall be valid as to creditors and personal representatives of the decedent.
The March 1998 issue of our newsletter discusses the issues relating to ancillary administration and are summarized here for situations involving decedents domiciled outside North Carolina. The ancillary estate administration procedures are set forth in G. S. 28A-26-1 through 28A-26-9. G. S. 28A-26-2 is a fairly straight forward provision authorizing a resident obligor to satisfy the obligation, with some limitations, by remitting directly to the out-of-state (domiciliary) personal representative without requiring an ancillary administration in North Carolina. This may be done at least 60 days after the date of death, and upon " being presented with a certified or exemplified copy of his letters of appointment and an affidavit made by or on behalf of the domiciliary personal representative stating:
(1) The date of the death of the nonresident decedent;
(2) That to the best of his knowledge no administration, or application or petition therefor, is pending in this State;
(3) That the domiciliary personal representative is entitled to payment or delivery."
Presumably this provision would allow the payoff of a mortgage and payment of sales proceeds in situations where administration is not required in order to effectuate a conveyance.
Ancillary administration is governed by § 28A-26-3 (a) . "Any domiciliary personal representative of a nonresident decedent upon the filing of a certified or exemplified copy of letters of appointment with the clerk of superior court who has venue under G.S. 28A-3-1 may be granted ancillary letters in this State notwithstanding that the domiciliary personal representative is a nonresident of this State or is a foreign corporation. If application is made for the issuance of ancillary letters to the domiciliary personal representative, the clerk of superior court shall give preference in appointment to the domiciliary personal representative unless the decedent shall have otherwise directed in a will." When an out- of-state decedent dies testate and the will contains a clear power of sale it is usually easiest for the domiciliary personal representative to qualify and exercise the power when it is desirable to convey an interest in real property. There may be some question as to the authority of the resident ancillary administrator to independantly exercise a power of sale, however, G.S.28A-13-3(19) authorizes a personal representative to "employ persons, including attorneys, auditors, investment advisors, appraisers or agents to advise or assist him in the performance of his administrative duties.
If the domiciliary personal representative is unable or unwilling to assist the decedents heirs in conveying North Carolina real estate § 28A-26-3(b) provides as follows:
"If, within 90 days after the death of the nonresident, or within 60 days after issue of domiciliary letters, should that be a shorter period, no application for ancillary letters has been made by a domiciliary personal representative, any person who could apply for issue of letters had the decedent been a resident may apply for issue of ancillary letters.
If it is known that there is a duly qualified domiciliary personal representative, the clerk of superior court shall send notice of such application, by registered mail, to that personal representative and to the appointing court. Such notice shall include a statement that, within 14 days after its mailing, the domiciliary personal representative may apply for the issue of ancillary letters with the preference specified in subsection (a) of this section; and that his failure to do so will be deemed a waiver, with the result that letters will be issued to another. Upon such failure, the clerk of superior court may issue ancillary letters in accordance with the provisions of Article 4 of this Chapter..."
If there is no will, or no clear power of sale where a will has been probated, G.S. 28A-17-1 through G.S. 28A-17-7 apply to an ancillary administration.
When a decedent has left an enforceable written contract to sell any real property, 28A-17-9 does not appear to be limited to resident decedents but it would seem that, arguably, an ancillary administration would again be needed in order for the personal representative to be able to act since the letters testamentary or letters of administration consist of the actual grant of power.