Professionals discuss the impact of probate property backlogs
The pandemic and stamp duty holiday has created huge waves in the probate sector with a serious backlog of properties to be sold as part of the estate administration process.
There is no getting away from the fact that the property market is under a lot of strain at the moment and chasing the tails due to the stamp duty holiday ending on March 31st. It has been reported that selling properties in probate has become extremely difficult process that is taking between 3 and 4 months longer than usual.
The pandemic has caused a spike in deaths, especially amongst the older generation, while there’s a severe backlog of properties set to be sold as part of the probate process. Plus, there is currently a shortage of surveyors, estate agents working with skeleton staff and social distancing rules have meant that families are trying to avoid contact with these professionals.
Professionals in the sector talk about their experiences and whether they have had the same difficulties, along with the repercussions and how they are managing client expectations.
Oli Budino, Regional Director of SFE, the membership organisation for specialist lawyers who support older and vulnerable people, says that the new probate system introduced late last year is still causing significant delays and adding strain to the property market. He said:
“The process of getting probate applications through has been incredibly difficult and time-consuming, and although it’s starting to improve, it’s evident there’s been a knock on effect on the sector and beyond. We’ve noticed conflicting advice from the probate registry on a few occasions: one SFE member was told that the office of probate was no longer expediting cases due to property sales, whilst another has been told that cases can still be expedited in exceptional cases for example where a contract of sale was entered into prior to death.
“The implications of the delays mean that many people in the UK could miss out on a house sale due to the long wait times which may lead to financial consequences in the estate administration process. In November last year, 56% of our members said the main implication they encountered from a delayed grant of probate was a house sale falling through. This shows just how many property sales are being affected by the delays.
“However, wait times are slowly starting to improve and we’re now seeing regular improvements to the online system. SFE has worked alongside HMCTS to provide feedback from our members and we’re happy to see that progress is being made.”
Ally Tow, senior associate – chartered legal executive at Boyes Turner LLP commented:
“Our experience of the current position regarding sale of probate properties is the same as the panel’s, namely that there is considerable delay in processing these sales at the present time. Undoubtedly the impending end of the stamp duty holiday is significantly contributing to these delays but the position is also exacerbated by the ongoing delays in processing of applications for grants of probate with executors unable to proceed to exchange of contracts without a grant.
“With the current buoyancy of the property market and the delays that are being experienced throughout the property market as a whole at the moment, in some cases these further delays have meant prospective purchasers have chosen to withdraw from the purchase of probate properties as the delays are simply too long and unpredictable in time scale. Another repercussion of the delays is the effect that this is having on beneficiaries who, given the difficult financial circumstances that many people are experiencing as a result of the COVID-19 pandemic, may be reliant on an expected legacy. Whilst there is no doubt that practitioners within both the probate and property sectors are working tirelessly to minimise these ongoing delays, it is important to ensure that clients are advised at the outset of the likely delays with an clear understanding that the sale of the property is not going to be quick and realistic time scales given in relation to the same.”
Michael Edwards, Business Director at Executor Solutions said:
“As expected, probate property remains appealing to all types of buyers and sales are buoyant. In many ways things – the selling of property – remain the same. The market environment, however, has very much changed and we have had to change with it.
“As we all know, the UK property market – from new build, to probate – is under immense strain. Enormous demand is slowing delivery of every associated discipline and frustrating completion timescales, which have significantly stretched.
“Given this we have had to adapt, changing our approach to not only how we market probate property, but to the support we need to give to executors and how we how we manage the expectations of purchasers
“Prior to changes with probate registries and the impact of the pandemic, we could put a property to the market safe in the knowledge that grant of probate would be issued well before any legal completion. However, with probate delays, this approach has changed. Clients now need to wait for the grant to be issued before marketing the property. This in turn has led to a backlog of probate properties waiting to come to market and a rise in requirements to maintain those properties.
“Before the delays a typical sales cycle from marketing a property through to legal completion was around 10 – 12 weeks. In current conditions this has now swelled 9 months. 6 more months that the property is required to be insured, 6 more months the property needs to be maintained and 6 more months of attention required by the individual administering the estate, which can have a huge an impact on the cost to the estate.
“This has led to the emergence of a larger issue, the burden on an estate’s funds over a longer period to ensure that vacant probate property is protected and maintained to protect future sale potential.
“We have had to respond to this change in conditions to assist clients helping them to manage the cost burden and manage property over an extended period of time:
“• Our services have more flexible terms (insurance for example) they are easy to arrange, competitive and without minimum terms/periods
“• UK wide maintenance contracts ensure that property can be inspected and remedial works can be carried out anywhere in the UK without breaking the government’s Covid guidelines or the requirement for onsite attendance by the executor
“• Valuing and selling probate property can be achieved using a method that shifts the fee onus onto the enthusiastic buyer reducing cost to the estate
“We suspect that we will need to continue to adapt re-assessing and re-designing our services as we go to ensure we are offering what is of benefit to executors and their clients.”
Jade Gani, Solicitor, Head of Wills & Probate at Aston Bond further commented:
“We have definitely noticed the backlog at the Probate Registry having a serious impact on the sale of probate properties. There seems to be no rhyme or reason behind the processing of applications at the Registry: some Grants come back in a couple of weeks, others have been outstanding for months on end. We are never given a decent explanation as to why and many applications appear to have been stopped for no reason. It means that we can’t realistically manage Client expectations: we tell them it could be months to be safe, but we actually get the Grant in a few weeks, then they think we don’t know what we are talking about; but if we say it could be just a couple of weeks then sod’s law says it will take months to arrive. We can’t win. Of course, without the Grant the sale can’t complete and the delays risk buyers pulling out from the sale.”
Emily Deane TEP, STEP Technical Counsel added:
“We understand that the Probate Service currently has a large backlog of probate applications to process due to an unexpected surge of applications which has been compounded by delays caused by the new online system. We urged HMCTS to consider several issues before mandating the online process for all professional applications and we advised that the mass roll out of the online service should be delayed. When it was first rolled out to professionals it was under developed and needed to be further refined, however HMCTS have worked hard to improve the efficacy of the online system over recent months. We hope that the government will recognise the disruption that these issues have caused to those in the probate/conveyancing process and that it will extend the stamp duty holiday deadline to ease the mounting pressure on families and professionals.”
Heledd Wyn, Director, Private Client at GL Law further added:
“We have a significant backlog of cases with the probate registry at the moment and no matter that the advice is to not agree a sale until probate is granted, the fact that some applications have been outstanding for 8 months is unreasonable to say the least.
“The distress caused to clients is huge and it is very difficult to explain to people that the delay is with the Court not us – it is so hard to manage expectations in these circumstances.”
Ruth Heap (TEP), Partner, Head of Private Client Services at Hillyer McKeown said:
“We are experiencing this problem. We always urge clients to be cautious and not to market properties until probate has been granted, as the delays are so great and the system is so unpredictable. However, the stamp duty holiday has led to people wanting to push transactions through and so there are matters where a buyer has been found and the delay at the registry is causing additional stress to all parties. Sometimes the registry has been able to assist and process a matter urgently, but this is by no means common place and getting hold of anyone who can help is not always easy.”
Charity organisations also commented on how the probate property delays has an impact on a charity’s cashflow and forecasting of legacy income.
Matthew Lagden, CEO at the Institute of Legacy Management said:
“Income from property sales is massively important to our charity members; around 70% of overall charitable legacy income comes from the sale of property, which equates to approximately £2.1bn per year. Therefore any delays or barriers to the efficient disposal of property, or anything that affects property prices, can negatively affect a charity’s cashflow and their ability to accurately forecast legacy income.
“Upcoming changes to stamp duty charges, as well as leasehold reforms, will cause further uncertainty in already difficult times. However we are hopeful that delays with probate will shortly be resolved and that our members, with the support of probate professionals, can continue to benefit from gifts of properties left in wills, which are vital to so many charities.
Rob Cope, Director of Remember A Charity, says:
“The British public can be incredibly generous and, each year, there are those who choose to leave their homes and even entire estates to good causes. Legacy gifts – worth around £3.5 billion a year – are vital for UK charities, particularly now when other charity income streams have been hit so hard by the pandemic.
“Long delays to probate and house sales can be a major obstacle for legacy cash flow, which is critical for so many of the charities in our network. That cash flow is often what determines whether they can continue their work or have to make the terrible decision to cut back on services.
“On a positive note, we know that HMCTS has put extra resource into the probate system and are working harder than ever to speed up the process.”