What to do if you inherit a property you don’t want

Inheriting a property can appear straightforward at first, but in practice it often brings with it far more responsibility than people expect.

You may be left with a family home, a rental property, a retirement flat or a house that has already been sitting empty for some time. Although the property may represent a valuable asset, it can also create an immediate need to deal with insurance, council tax, service charges, repairs, outstanding borrowing and the administration of the estate.

The situation can become even more difficult where several people inherit the property together, particularly if they have different views on what should happen next. One beneficiary may want to sell, another may want to keep the property, while someone else may not feel ready to make a decision at all. In the meantime, the property continues to generate costs and can become harder to deal with the longer it is left unresolved.

For that reason, it is worth understanding the position properly before deciding what to do.

Start by understanding what you have inherited

Before making any decisions about selling, renting or keeping the property, it is important to establish exactly what you are dealing with.

That usually means understanding the probate value, whether there is a mortgage or another secured debt against the property, what the ongoing running costs are and whether there are any significant issues with its condition.

Equity release arrangements can be particularly important because some products carry interest that compounds over time. By the time probate has been granted and the estate is ready to deal with the property, the amount outstanding may be considerably higher than family members expected.

The type of property can also make a difference. Retirement flats may continue attracting service charges and ground rent even when they are empty, while holiday park homes and timeshares can come with management charges, contractual restrictions and limited resale markets.

If the inherited property is already rented out, there may also be existing tenants and landlord responsibilities that need to be dealt with properly before anything changes.

The important point is that the headline value of a property does not always reflect the true position. A property may be worth a substantial amount on paper, but the debts, costs and practical responsibilities attached to it can affect what it is actually worth to the people who inherit it.

Selling may be the most practical option

If nobody in the family wants to keep the property, selling it is often the most straightforward route.

That does not mean there is any need to rush. The executors will usually need to deal with the administration of the estate first, including any inheritance tax due and the probate process. Once the estate is in a position to sell, it is sensible to understand the property’s current value and condition before deciding how to proceed.

Some inherited homes can be sold with very little work, while others may have been empty for years, require significant repairs or have become difficult to manage.

Families sometimes assume that they need to renovate a property before putting it on the market, but that is not always the best use of time or money. Improvements can make sense where they are likely to add more value than they cost, but there are also situations where spending months managing works simply creates more expense and stress without materially improving the final outcome.

The right decision depends on the condition of the property, the circumstances of the estate and what the beneficiaries are actually trying to achieve.

The executors may be able to sell the property

In some cases, it may be possible for the executors to sell the property as part of the estate rather than transferring it into a beneficiary’s name first.

The net proceeds can then be distributed to the beneficiaries once the estate has been dealt with.

Whether this is appropriate will depend on the terms of the will, the circumstances of the estate and the tax position. There can be different capital gains tax consequences depending on whether the executors or the beneficiary are treated as making the disposal, so the arrangement should be considered carefully and documented properly.

For someone who already knows they have no intention of keeping or managing the property, it can be worth discussing this route with the executor or solicitor dealing with the estate.

Renting the property is another option

Selling is not the only choice available, and in some circumstances keeping the property and renting it out can make sense.

The benefit is obvious because the property may provide a regular income while remaining within the family, but becoming a landlord comes with legal, financial and practical responsibilities that should not be underestimated.

This is especially true since the Renters Rights Act recently came into effect, granting widespread protections to tenants whilst simultaneously imposing significant additional requirements on landlords with draconian penalties for non-compliance.

These requirements can include insurance requirements, safety obligations, tenancy agreements, deposit protection, energy performance standards and tax on rental income. If tenants are already living in the property when it is inherited, their existing rights and tenancy arrangements also need to be understood before any changes are made.

Renting can be a sensible long-term option where the numbers work and the beneficiaries are comfortable with the responsibilities involved. It is less attractive when it simply postpones a decision that nobody really wants to make.

Joint inheritance can make things more complicated

Some of the most difficult inherited property situations arise not because there is anything unusual about the property itself, but because several people own it together.

Leaving a house to two or three children can seem simple when a will is written, but by the time the property is inherited, each person may have a very different financial position, relationship with the property and view on what should happen to it.

One beneficiary may want to sell immediately, another may want to keep the property for sentimental reasons, while someone else may prefer to rent it out. If no agreement can be reached, the property can remain empty while council tax, insurance, maintenance and other costs continue to accumulate.

There are several ways these situations can be resolved. One beneficiary may be able to buy out the others, the beneficiaries may agree to divide other assets within the estate differently, or the property may ultimately need to be sold and the proceeds divided.

If the property is kept jointly, it is important to agree how the practical responsibilities will be handled. This should include who pays for insurance, repairs and other costs, how decisions will be made, how any rental income will be distributed and what happens if one owner wants to sell their share later.

Putting these arrangements in writing at the outset can prevent a difficult situation becoming even more complicated in the future.

Tax can affect the decision

Inheritance tax is generally dealt with as part of the administration of the estate rather than becoming a separate personal bill for the beneficiary.

However, tax can still become relevant after the property has been inherited.

If the property increases in value between the date of death and a later sale, there may be capital gains tax to consider. There can also be implications for people who have never previously owned a home, because inheriting an interest in a property can affect first-time buyer status and the reliefs that may otherwise have been available when purchasing a property of their own.

The tax position will depend on the circumstances, which is why professional advice can be worthwhile where the estate or ownership structure is not straightforward.

You can refuse an inherited property

You are not obliged to accept a property simply because it has been left to you.

In some circumstances, it is possible to disclaim an inheritance, which means formally giving up your entitlement to it. This will generally only be possible if you have not already accepted a benefit from the property, such as moving into it or receiving rental income.

A disclaimer cannot usually be used to choose who should receive the property instead. Once the inheritance has been disclaimed, it will pass in accordance with the remaining terms of the will or, where applicable, the rules of intestacy.

Where the intention is to redirect the inheritance to another person, such as a child or grandchild, a deed of variation may be more appropriate.

A deed of variation generally needs to be completed within two years of the death and agreed by the beneficiaries whose entitlement is affected. It can also have inheritance tax and capital gains tax implications, so it is important to take advice before relying on it as part of any wider estate planning decision.

The best option is not always the one with the highest price

Property decisions are often framed around achieving the maximum possible sale price, but that is not always the most important consideration.

For some families, the priority is to reduce the amount of time they spend dealing with the property. For others, it is about avoiding further costs or resolving disagreements between beneficiaries. In some cases, the main objective is simply to bring a difficult and emotionally draining situation to an end.

An inherited property can carry financial value, family history and emotional significance while also becoming something that nobody has the time, money or capacity to deal with properly. Those things are not mutually exclusive, and recognising that can make it easier to make a sensible decision.

At Augusta, we deal with properties where the conventional route is not always the easiest one, including homes that have been left empty during probate, properties shared between beneficiaries with different priorities, and houses that need more work than the family wants to take on.

Our role is not to push someone towards a particular decision, but to provide a clear and practical option where one is needed.

If you are dealing with an inherited property and are unsure what the next step should be, we are happy to talk through the situation and explain what may be possible, whether or not you ultimately decide to sell to us.

This article is intended as general information and does not constitute legal or tax advice. Professional advice should be taken where appropriate.