July 2011 – P.R. Selling Real Estate Property

Far and away, the underwriting question I get most often pertains to estates. Of those questions, the issue most prevalent is the question of when a Personal Representative (Executor) can sign the Deed without the joinder of the heirs. This is oftentimes not an easy question to answer as there is a split between attorneys in this State concerning that issue. As is the case on occasion, the underwriting “answer” may part ways from the legal one. The short answer is that it depends largely on the wording of the will.

Generally speaking, property vests with a person’s devisees or heirs the instant he or she dies. However, the devisees’ or heirs’ interest in the property is subject to divestment in the hands of the PR. NC General Statutes Section 28A-15-1(c) gives authority to a PR to sell real estate for the payment of debts and other claims against the decedent’s death. The statute generally anticipates that the PR will initiate a Special Proceeding with the Clerk of Court, however, a Special Proceeding may not always be necessary.

Whether a Special Proceeding before the Clerk will be necessary depends on the wording of the decedent’s will. The will can give the PR power to sell real estate by: (1) conveying title to the property directly to the PR and either indicating that the PR has the power to sell real property or by incorporating by reference the powers listed in NC General Statutes 32-26 (which includes the power to sell real estate) OR (2) Giving the PR the power to take possession of real property and sell it without court order.

In my experience, the vast majority of wills do not have the language necessary to allow for the PR to sell the real property as described in the two examples above. Rather, the wills that we see almost invariably devise property to certain enumerated heirs and gives the PR either specific powers to sell real estate or incorporates the powers listed in 32-26. Note the distinction I am making. . .a will that devises property directly to the PR is vastly different than a will that devises property to certain identified heirs. It is the latter scenario that I would like to address. As indicated above, there is a split among attorneys (and Title Carriers) regarding what is necessary in order to allow a PR to sell real estate when the property is devised to certain enumerated heirs. The statute at the crux of the analysis is listed below (NCGS 28-15-1). On its face, the statute indicates that a decedent’s real estate will be available to a PR who determines that “such selection is in the best administration of the estate.”

Some attorneys believe that this language gives broad powers to a PR to take actions that are in the best interest of the administration of the estate. Under this interpretation, a PR could sell the decedent’s real estate for a whole host of reasons: for example, (1) because the heirs are spread out across the United States or abroad or (2) because one of the heirs has significant judgments against him or her. In my view, this interpretation fails to consider one the central roles of the PR in the first place – which is to satisfy and clear all debts of the estate – as well the first sentence of section (a) which states, the assets of the decedent shall be “available for the discharge of debts.” One of the holdings in the case of Montgomery vs. Hinson, 262 S.E.2d 697 (1980) made clear that a PR should not have unfettered discretion to do as he chooses with an asset that essentially belongs to an heir. In my opinion, taking the holding in the case and the words of the statute in conjunction with each other, the PR should only look to sell real property when it becomes necessary to sell the property to satisfy debts of the estate. Below I have listed the scenarios in which I believe the PR can sell a decedent’s real property without the joinder of the devisees/heirs:

Property is conveyed directly to the PR with a specific provision permitting the PR to sell property;
Property is conveyed to the PR and the will incorporates the power to sell by making reference to NCGS 32-26;
Property is conveyed to the heirs, but grants authority to the PR to sell the property without court order AND the PR determines that the real estate must be sold to satisfy the debts of the estate;
Property is conveyed to the heirs, but grants broad authority to the PR take any steps he or she believes necessary to administer the Estate***;
PR is granted authority to sell the real estate upon petitioning the Clerk of Court.

***This is an example of a beautifully crafted will provision – “The Executor is authorized to take possession, custody or control of any real or personal property in my estate, to use any real or personal property not specifically devised to satisfy any devise under this Will which may be satisfied in kind, and to sell at such times and price and upon such terms and conditions as he or she may determine and for any purpose, any real or personal property not specifically devised as to which he or she may take possession, custody or control, all without the necessity of prior court approval or notification to any heirs, beneficiaries or devisees of the estate. The power is meant to be a broad grant of power to deal with the personal and real property in my estate and is not limited to those situations in which a sale is necessary to generate proceeds to pay debts, expenses and claims of the estate. If my Executor determines in his or her discretion, that he or she is not required to take possession, custody or control of such property, his or her decision shall be binding and conclusive on all persons taking hereunder.”

Note: If the Estate has not been closed, the PR MUST join in the execution of the Deed with the heirs/devisees. In so doing, the PR is essentially indicating that the estate has sufficient other assets outside of the real estate to satisfy debts of the estate. The PR’s signature on the Deed will estop him or her from later trying to pull the real property back into the estate to be sold. It is essential that you have the PR execute the Deed whenever real estate is being sold and the decedent’s estate is still open.
§ 28A-15-1. Assets of the estate generally

(a) All of the real and personal property, both legal and equitable, of a decedent shall be assets available for the discharge of debts and other claims against his estate in the absence of a statute expressly excluding any such property. Provided that before real property is selected the personal representative must determine that such selection is in the best interest of the administration of the estate.

(b) In determining what property of the estate shall be sold, leased, pledged, mortgaged or exchanged for the payment of the debts of the decedent and other claims against his estate, the personal representative shall select the assets which in his judgment are calculated to promote the best interests of the estate. In the selection of assets for this purpose, there shall be no necessary distinction between real and personal property, absent any contrary provision in the will.

(c) If it shall be determined by the personal representative that it is in the best interest of the administration of the estate to sell, lease, or mortgage any real estate or interest therein to obtain money for the payment of debts and other claims against the decedent’s estate, the personal representative shall institute a special proceeding before the clerk of superior court for such purpose pursuant to Article 17 of this Chapter, except that no such proceeding shall be required for a sale made pursuant to authority given by will. A general provision granting authority to the personal representative to sell the testator’s real property, or incorporation by reference of the provisions of G.S. 32-27(2) shall be sufficient to eliminate the necessity for a proceeding under Article 17. If a special proceeding has been instituted by the personal representative pursuant to G.S. 28A-13-3(c), the personal representative may petition for sale, lease, or mortgage of any real property as a part of that proceeding and is not required to institute a separate special proceeding.

(d) The crops of every deceased person, remaining ungathered at his death, shall, in all cases, belong to the personal representative or collector, as part of the personal assets of the decedent’s estate; and shall not pass to the devisee by virtue of any devise of the land, unless such intent be manifest and specified in the will.

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