Lew Sichelman
What happens when the person buying your house dies before the closing date? Or when your tenant passes away mid-lease?
The short answer: Everything changes.
Typically, when a homebuyer passes, their right to the contract passes to their beneficiaries or heirs, who then decide whether or not to proceed to closing. Usually, they decide not to. If the buyer’s spouse is on the contract, the transaction can proceed if they so desire – and if the lender will still approve the loan despite the loss of the deceased’s income.
If the sale is canceled, the seller may be able to keep the earnest money deposit, depending on their state’s laws. They can also file a claim against the buyer’s estate for lost profits, but it is rare that a seller wins such a case. Generally, the best remedy is to start over with a new buyer.
It’s much more complicated when a tenant dies, especially if the death occurs in the rental property. There are all kinds of variables to consider, including the number of people on the lease and whether the deceased was the victim of a crime. Since we can’t cover every scenario, the following is a brief discussion of the general protocol around the unexpected death of a sole tenant.
Nothing here should be construed as legal advice. For that, speak with a lawyer, especially because laws vary from state to state.
Don’t Check Your Humanity at the Door
Usually, you’ll learn about the death of a tenant in one of two ways: Either a family member (or the executor of the will) notifies you, or you discover the body. If it’s the latter, immediately call 911. The authorities will remove the remains and notify the next of kin.
From there, you will work with the deceased’s relatives, so be mindful of their feelings.
“Landlording is a business, and your tenants are not your friends,” writes Kimberly Rau in a post on the website for MassLandlords, a major trade group for landlords of all sizes in Massachusetts. “However, that doesn’t mean that you should check your humanity at the door.”
If there are no relatives, then the executor of the tenant’s estate will come forward. If the tenant died without an executor, a personal or court-appointed representative will handle the estate.
Whomever you deal with, your first step is to secure the premises. This not only protects the tenant’s personal property until their loved ones can collect it – which is your responsibility under the law – but also protects you from liability if something is missing. Lock all windows and doors, and change the locks just in case the tenant had given keys to someone else.
Next, obtain a written notice of death, which will allow you to begin the legal process of ending the deceased’s lease.
“Receiving a written notice is essential,” according to a column by Ava Johns at TurboTenant.
If You’re a Landlord, Have Patience
With a death notice in hand, you can begin the process of removing the tenant’s possessions and preparing the property for the next renter. You can arrange a time for the next of kin to remove any belongings, but you cannot remove them on your own without the estate’s cooperation.
“The process will take a bit of time, so have patience,” writes Stephen Michael White of RentPrep. “The original lease agreement stands until you and the executor can close it out, so you must continue as if the tenant were still occupying the property.”
Regardless of the circumstances surrounding the tenant’s passing, the lease and all its terms and obligations transfer to their estate, which is legally responsible for paying rent until the contract is terminated.
If the tenant was on a month-to-month lease, the official death notice acts as the 30-day notice of the lease’s termination. If the executor asks for an extension, you can grant it. In that case, the estate owes you rent for not just the last 30 days, but also for as long as the extension lasts.
Even if the tenant had a long-term lease, the estate is still legally responsible for the rent until the lease expires. However, your state may forbid so-called “death penalty” lease clauses that require leases to run to term. Pennsylvania, for example, prevents landlords from collecting more than two months’ rent after a tenant dies.
Be Cautious, Get It In Writing
As for the tenant’s deposit: It’s considered part of the estate. You can use the deposit to cover unpaid rent, property damages or cleanup expenses, but the remaining amount must be returned to the estate. If the deposit doesn’t cover the cost of returning the place to acceptable livability, you’ll have to work with the executor for reimbursement.
If the estate does not remove the deceased’s belongings in a timely manner, you should obtain written permission to clear the place yourself. But again, check with the authorities first, and proceed with caution.
Cleaning could be another problem – and an expensive one. In some states, depending on the circumstances of the death, you may be required to hire biohazard specialists before renting the place out again. Such remediation costs may be covered by the tenant’s renter’s insurance policy, or perhaps by your own policy.
When the place is empty and has been cleaned thoroughly, the estate will sign a form called “release to the rights of possession,” which said that the tenant is no longer an occupant and that all their belongings have been removed. With that form in hand, you are now free to rent the place again.
Lew Sichelman has been covering real estate for more than 50 years. He is a regular contributor to numerous shelter magazines and housing and housing-finance industry publications. Readers can contact him at lsichelman@aol.com.
