One of the more common problems during probate is what to do with real property when the estate cannot make mortgage payments. There are only two practical solutions. One, the heirs of the estate can make the mortgage payments to keep the property in the estate. Two, the personal representative can sell the real property. Selling a property in probate requires either court approval or a notice of proposed action.
Notice of proposed action is part of a procedure authorized by the Independent Administration of Estates Act to allow a sale of real property without prior court approval. If the beneficiaries consent, waive notice or fail to object, then you do not need court approval to sell real property.
But a notice of proposed action is not authorized in every probate. Moreover, even in those cases where a notice of proposed action is authorized, you may still want to seek court supervision.
When is a Notice of Proposed Action Authorized?
To make the administration of probate estates easier, California adopted the Independent Administration of Estates Act (“IAEA”).[i] The IAEA permits a personal representative to administer certain aspects of the estate without court approval, confirmation, instruction, or supervision.[ii]
To receive the authority to act under the IAEA, you must request the authorization in your probate petition. (In California, it is merely a box you check on the judicial council form.) You can find the form for a petition for probate, HERE.
For instance, in the California form above, you need to check the box on the first page that says “Authorization to Administer Under the Independent Administration of Estates Act.”
The court can grant full or limited authority under the IAEA.[iii]
To sell real property, you need full authority.[iv]
When the court signs the probate order look at item 4 on order, if the Judge marks box 4(a), then you have full authority under the IAEA. As an example, you can see a sample form order HERE.
If the court granted you full authority under the IAEA, then you can sell real property without prior court approval. But first, you need to serve a “Notice of Proposed Action” on all of the heirs.
Using a Notice of Proposed Action to Sell Real Property.
As stated above, the IAEA gives broad authority for personal representatives to administer an estate without court supervision. For example, one of the broad powers granted to persons with full authority under the IAEA is the power to sell real property.
As with many actions under the IAEA, you must give notice before you take any action under the IAEA.
Thus, you cannot just do whatever you want. Moreover, if an heir objects, then you cannot take the proposed action without court supervision.[v]
Procedure for Selling Property
Once you decide that you need to sell real property in an estate, you need to serve a Notice of Proposed Action on all of the heirs, other persons listed in the will, and anyone who requests special notice.
There is a simple PDF form you can fill out. You can find the form HERE.
When you fill out the form, be sure to include the proposed sale date and the terms of the sale. I usually attach a copy of the offer and real estate agreement.
Once you fill out the form, you need to “serve” the form on everyone listed in the petition (the heirs and persons named in the will) and also anyone who specially requests notice.
To properly serve the notice of proposed action, you need to send the notice by mail or personal delivery at least 15-days before the proposed action. Thus, you cannot serve the notice the same day as the proposed sale.
Additionally, if you have agreed with the parties to accept service by email, you can serve the notice by email. If everyone agrees to electronic service, they need to consent in writing. You can find a form consent HERE.
If no one objects within 15-days, then you can sell the property.
Speeding up the Procedure
But what happens if you need to sell the property sooner than 15-days? If all of the partied agree to sell the property, then you have two options.
First, you can personally deliver the notice of proposed action to persons entitled to notice. On page 2 of the notice of proposed action, there is a space for the person to either consent or object to the proposed action. If you receive everyone’s signed consent, then you can sell the property as soon as you have the signed consent from all persons.
Second, if you know that you will need to sell the property and if everyone agrees with you, then you can have everyone sign a “waiver of notice of proposed action.” You can find the form HERE.
If everyone waives notice, then file the waivers with the probate court. Once that happens, you can sell the property at any time without further notice. Although, as discussed below, you likely want to continue to keep the heirs up to date with what’s happening and receive their input.
What to Do if You Object.
If you object to a proposed action, then you need to be sure that you sign the section of the notice of proposed action that says, “I object to the proposed action.” But signing the objection is not enough; you need to make sure that the personal representative received the objection before the date for the proposed action.
You should also file that same objection with the court.
The other option you have is to file an ex parte application for a restraining order.[vi] This is a document that gets filed with the probate court and indicates the action that you believe the personal representative intends to take and requests that the court prevent his/her form acting without further court approval.
Circumstances Where You May Want Court Approval Even if You Don’t Need It.
Just because you can do something does not mean you should. Although the IAEA gives personal representatives of an estate authority to sell property without court approval, it is not always best to exercise that authority.
For example, since the IAEA does not protect the representative from objections to his or her accounting, if the estate is insolvent, then you may want to seek court approval before selling estate assets.
Additionally, if there is hostility among the beneficiaries or between the beneficiaries and the personal representative, then court approval may further hostility.
If the proposed action involves a highly complex transaction, court approval is helpful.
Finally, if you know that someone is likely to object to the proposed action, it could be prudent to seek court approval. Dealing with only one procedure is easier than dealing with two.
The IAEA does make administering a probate estate much easier. But it also imposes additional notice requirements on the personal representative. The notice of proposed action helps the representative administer the estate more efficiently. But if the personal representative does not follow the proper procedures, it could result in significant liability.
If you are currently involved in a probate estate, you may be interested in our other detailed article titled How to Probate an Estate in 11 Detailed Steps.
For more detail on how to use a Notice of Proposed Action check out our article called “3 Ways to Sell a California Home in Probate Without Court Approval.”
[i] California Probate Code §§ 10400-10592 et seq.