Avoiding Future Real Estate Blunders (Do the C.O. and Pay Liens Yourself)

I have written before about Probate pitfalls and horror stories (stock certificates and EE Bonds being the items I loathe the most). Let’s talk about another item of property that makes some Executors cringe and beneficiaries moan: When an estate (and estate attorney) neglects properly handling Real Estate.

Many of us know the emotional roller coaster ride of buying and selling a house – offers, counter offers, mortgage heartburn, moving, last second surprises (continue any possible stressful occurence ad infinitum). Now imagine a third-party (an Executor / Administrator / Trustee) having to figure these out and paying for attorney’s assistance out of your estate’s assets or, worse, initially out of their own pocket. It is at this point our story begins:

I had a case where there was an additional bathroom that was added to the house and the backyard deck that was built years ago, neither of which was properly registered with the municipality.

Of course no one except the decedent knew this, so now the house, still in contract to be sold, needed updated Certificates of Occupancy (or as attorneys call it, “The CO” or “Oh No”). Now we were waiting on the municipality to chug out paperwork. In addition there was a lien on the house for an “unjust” medical bill which was never paid, and an old mortgage from a bank that never filed the Mortgage Satisfaction. These issues were only found out during a Title Search and lien search, which (as is often the case) wasn’t done until the Contract of Sale had been executed. Now the Closing had to be postponed for months, real estate taxes and expenses had to be paid, beneficiaries had to wait for their bequests (no one likes waiting for money), there was more work for the fiduciary (who is only getting paid a flat fee, so now their work was uncompensated), more anxiety and bad energy emanated from the impatient purchaser, and more legal fees began to accrue.

So 3 months later the municipality had finally issued the CO, but the fiduciary decided (against all reasonable demands) to stop heating the house appropriately and the water pipes burst in the house due to freezing. Now the water in the pipes thaws and, yes, water began pumping into the house. Not good. In addition, the fiduciary (again, opting not to listen to legal advice because she had to pay out of pocket for the time being) decided to tell the home insurance company the home’s owner died, found out home owner’s insurance for an estate is insanely expensive (for the exact reason above), and decided not to pay it. It was a perfect disaster: The buyer pulled out of the purchase, the home was horribly damaged, the beneficiaries were pissed, and the Executor tried to step down (the court did not allow it – she was stuck finishing the job).

I have seen this exact fact pattern, and seen similar occurences more than once. And I’m sure I will see it again.

The lesson here is to deal with COs while you are still alive – it will save your estate a good deal of expenses. Pay or formally dispute any bills which could otherwise have a lien placed on your house. And if you have a Revocable Trust make sure it is the owner on your Deed to avoid Probate. If you are an Executor, make sure to continue proper utilities (I.e. heat). I won’t tell you not to inform the insurance company that the home owner died, but will tell you that home owner insurance policies for an estate are extremely expensive (probably due to the fact pattern above: No one lives there, so no one knowns about damages taking place in real time).

In ideal estates real estate is still often the last piece of property to be sold and distributed; do your beneficiaries and Executor a favor and take care of the potential issues during your life.

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