Buying a home is stressful enough without discovering that the vendor has died after you have exchanged contracts but before settlement.

This situation can be particularly confusing if the property was being sold by an attorney acting under a power of attorney. The good news is that the vendor’s death does not necessarily mean that your purchase is automatically cancelled. However, there can be significant complications and delays before settlement can take place.

Is the contract still binding?

Exchange of contracts is the point at which the sale becomes legally binding. Once contracts have been exchanged, both the purchaser and vendor are generally committed to the transaction, subject to the terms of the particular contract.

The death of the vendor does not, by itself, necessarily undo a contract that was already validly exchanged.

However, the precise wording of the contract is extremely important. The contract may contain provisions dealing with the death, incapacity or bankruptcy of a party. Your solicitor should therefore immediately review the contract before you take any further steps.

What if the property was being sold by an attorney?

This is an important distinction.

A power of attorney generally gives another person authority to act on behalf of the property owner. However, the death of the principal can terminate the attorney’s authority.

The Powers of Attorney Act 2003 (NSW) provides that an ordinary power of attorney does not continue after the principal’s death, subject to specific exceptions, including certain irrevocable powers of attorney.

This means that the attorney who signed the contract may no longer have authority to complete the transaction after the vendor’s death.

That does not necessarily invalidate the contract. Instead, the estate may need to take over responsibility for completing the sale.

What happens to the property?

Following the vendor’s death, the property becomes an asset of the deceased estate.

The executor named in the vendor’s will may need to obtain a grant of probate before the estate can properly deal with the property. If there is no valid will, or there is another reason why an executor cannot act, an application for letters of administration may be necessary.

This can cause a delay to settlement.

The purchaser’s solicitor should communicate with the vendor’s solicitor to determine:

• whether the vendor left a valid will;
• who the executor is;
• whether probate or letters of administration is required;
• whether an application has been made;
• whether the title can be dealt with at settlement; and
• whether the existing settlement date can still be met.

Can the buyer force the sale to proceed?

Potentially, yes, but this depends heavily on the contract and the circumstances.

The fact that the vendor has died does not automatically give the estate a right to simply walk away from an exchanged contract. NSW Government guidance confirms that, following exchange, the seller is legally bound to the agreement.

If the estate cannot settle on the agreed date, the purchaser may have contractual rights, including potentially issuing a notice to complete or seeking other remedies.

However, taking enforcement action against a deceased estate can be more complicated than an ordinary conveyancing dispute. There may also be legitimate reasons why the estate cannot immediately complete the transfer.

What should a purchaser do?

The most important thing is not to assume that the transaction has fallen through.

Ask your solicitor or conveyancer to obtain an immediate update from the vendor’s legal representative. You should establish exactly why settlement cannot proceed and what steps are being taken to enable the estate to complete the transaction.

You should also be careful about making alternative arrangements, such as moving out of your existing home, arranging finance for a different property or agreeing to occupy the property before settlement, until your legal position has been properly considered.

Settlement is the point at which the balance of the purchase price is paid and ownership is transferred to you. NSW residential settlements are generally completed electronically.

Get legal advice early

A vendor’s death between exchange and settlement can create uncertainty, but it does not necessarily mean you have lost the property.

The outcome will depend on the contract, the vendor’s estate, the authority under which the contract was signed, the state of the title and whether the estate can take the necessary steps to complete the sale.

Here to Help

If you are a purchaser facing this situation, contact us now for free no-obligation initial telephone advice. We can review your contract, communicate with the estate’s representatives, and advise you about your rights if settlement is delayed or the estate attempts to avoid completing the sale.