Fri, February 19th, 2010
Lease of Real Property is Permitted in Probate, But Creditors Can Have a Say
Of the many things an administrator of a probate can do without court approval, I find that the leasing of real property held by the estate, for up to one year, to be the most questionable. Yes, it can be done, and no, it does not require court approval if the lease, including options, is no more than one year. However, where there are creditors with claims pending, I believe the adminstrator should ignore this convenience and instead seek court approval so that they could not be surcharged later. There may be beneficiaries who would not be happy with this arrangement either (there is a generally-accepted ten year maximum on leases that need court approval, so that beneficiaries are protected).
Why a one-year maximum? Because in my opinion even one year may work to strip creditors of their right to get paid. Anything beyond that would make it even more difficult for the creditor or the creditor’s attorney to manage the claim and make sure it’s paid.
In reality, most leases will probably carry an option to extend, or even an option to purchase, which takes it out of this rule and requires the administrator to seek approval. In those cases, the court will often hear from the creditor, who of course is given notice, and determine if the approval of the proposed lease arrangement would be of benefit to the estate and would still be fair to the creditor.
The Probate Code section where approval is not required is 9942. Section 9942 is the section which imposes a requirement of approval. Section 9960 et seq. govern an additional procedure where an option to purchase is included in the proposed lease agreement.
Posted by Nick Yonano at 10:08
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Labels: claim, estate planning, probate, real estate
