Mortgage payments for joint property whilst estate in administration

Trusts Discussion
1

Hi all

I am dealing with an estate where the deceased owned the property as tenants in common with his partner. They had a joint mortgage. The deceased left his share of the property to his children. No mention of the mortgage and whether free of or not.

There are two questions.

First, who is to be responsible for the mortgage repayments whilst the estate is in administration. I understand that the mortgage is now in the surviving partner’s sole name. The surviving partner has been collecting a 50% contribution to the mortgage from the deceased’s children for the half share they get under the deceased’s will.

  1. How should the proceeds be dealt with after sale?

We will have to discharge the mortgage from the proceeds upon sale.

Do we ask the partner to pay back her half share of the mortgage liability, to the estate essentially deducting it from her share of the proceeds.

Or should we also ask the children to pay the other half share of the mortgage liability (essentially deducting the deceased’s half share of the mortgage liability?

Or should we deduct the entire mortgage liability from the partner’s half share since the whole liability is now hers?

My thinking is that at the date of death the deceased owed half and the partner owed half of the mortgage. Therefore the estate pays the date of death liability (being half the mortgage). Following the death of the deceased, the mortgage liability is now in the surviving partner’s sole name and is now her sole responsibility. Therefore the repayments whilst the estate is in administration are her sole responsibility and the deceased’s children should not be paying half the mortgage whilst waiting for the property to be sold.

On the sale of the property, what is due to the estate is half of the sale proceeds less half of the date of death liability. Half of the expenses of sale should be borne by the estate as a testamentary expense before the residuary estate is determined.

Does anyone agree/disagree? Any thoughts would be greatly appreciated. Many thanks.

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2

As there does not appear to be any contrary intention, the deceased’s gift of half the property passes to his children, along with half the mortgage liability.

Therefore, although the surviving partner is likely to be liable for the entire mortgage under the terms of the mortgage deed, I think beneficially the estate should bear the burden of half of the mortgage until the property is sold.

Kind regards

Ihsan Ali
I Will Solicitors Ltd

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3

Where property is specifically devised and is subject to a charge, unless the devise is given free of the debt the debt passes with the property.

In the present instance, the children will take subject to the liability for a half share of the mortgage.

Whilst the surviving mortgagor is liable to the mortgagee for the entire sum, despite the children being responsible for a half share, to my mind it is fair for the children to contribute a half share of the ongoing mortgage payments until the property is sold.

If the children’s share of the mortgage was only to be settled out of the proceeds of sale, this could place an intolerable financial burden on the surviving mortgagor as they will be relying upon a single income only to finance the monthly(?) repayments.

Paul Saunders FCIB TEP

Independent Trust Consultant

Providing support and advice to fellow professionals

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4

Many thanks, Paul. Your response is much appreciated.

5

Thank you Ihsan for your response.