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Sale of probate property in the EU after the new EU Successions Regulation comes into force on 17th August 2015

This article is for general information only. International succession law and foreign property is a highly specialised area and you should only act or refrain from acting after receiving full professional advice on the facts of your particular case.

The EU Regulation 650/2012 comes into force across the EU (except for the UK, Ireland and Denmark) on 17th August 2015 and fundamentally changes the position for international inheritances. It abolishes the current centuries’ old division between immoveable property of the deceased, which follows the law of the country where the land is situated and moveable property, which follows the law of the domicile of the deceased. Going forward there is to be only one law, that of the last residence of the deceased or the deceased’s nationality, which will govern his entire estate. The idea is that this will simplify international successions in the EU, which is a rapidly growing area.

UK has opted out and is a “third State” and not a “Member State”

Because the UK, Ireland and Denmark have opted out the Regulation will not apply in these countries (called a “third State”) but their law can be applied in all the other EU countries which have not opted out.

Key point

From 17th August 2015 inheritances subject to English law will require the notary or lawyer in the EU country in which the deceased’s property is situated to obtain a grant of probate or letters of administration from his local foreign court. Under the new EU Regulation a grant of probate or letters of administration obtained from the High Court in England is not valid elsewhere in the EU. This is because England has opted out and is not a member state for the purpose of the regulation. The same applies to Ireland and Denmark.

Accordingly if an English national chooses English law in his will to apply to his French holiday home, in order to sell the property the French notaire must obtain a grant of probate from the French court. Under the EU Regulation the High Court in England is not viewed as having jurisdiction in France and an English grant of probate cannot be used.

New basic rule

Under the new Regulation the default law which will apply to estates will be the law of the deceased’s last residence. It is open to the deceased to choose by will for the law of his nationality to apply. In most cases this will be the same law. Any country’s law can apply even if not within the EU. Accordingly an Australian national, resident in England with a holiday home in France could elect in his will for Australian law to apply to his French property and in default thereof English law would apply. Before the Regulation comes into force French law will apply as the land was in France.

This means that forced heirship (requires children to inherit) which would automatically apply to property situated in many EU countries regardless of where the deceased was domiciled will no longer apply if the law applicable is say English law which does not contain such a provision.

Vesting the property in the heirs

In most of continental Europe including France the deceased’s property vests directly in the heirs. There is no concept of a personal representative owning the property on death and when the administration of the estate is over vesting the property in the beneficiaries of the estate. The heirs own the property on death and broadly can sell it.

England and most common law countries differ fundamentally in that on death assets vest in either the executors (if there is a will) or the administrators (if there is no will). They are collectively called “personal representatives”. They are responsible for collecting in the deceased’s assets, paying his taxes and debts and then transferring the assets to the beneficiaries. The deceased’s house vests in the executors or administrators who are the people who sell the property. The personal representatives have to obtain a court order to be able to administer the estate and sell the deceased’s assets. This is obtained from the High Court in England and is called a grant of probate if there is a will, and letters of administration if there is no will. Without this court order the deceased’s property cannot be sold.

What the Regulation extends to

The EU Regulation is very wide ranging and deals with all aspects relating to the administration of the estate and the sale of the deceased’s assets. Article 23 (2) (f) provides that the succession law shall govern “the powers of the heirs, the executors of the wills and other administrators of the estate, in particular as regards the sale of property and the payment of creditors, without prejudice to the powers referred to in Article 29(2) and (3)”

Competency

The EU Regulation also deals extensively with which courts have competence to deal with inheritance matters. Article 4 provides that “The courts of the Member State in which the deceased had his habitual residence at the time of death shall have jurisdiction to rule on the succession as a whole.” This excludes the UK as it is not a Member State for the purposes of the Regulation. You are thrown back to the sweep up provision in Article 10 (2) which provides that “the courts of the Member State in which assets of the estate are located shall have jurisdiction to rule on those assets.” This will always mean that in the case of English, Irish or Danish law applying to a succession, the local courts where the property is situated will be the only ones which are competent.

Risks

What could go wrong when you buy a property in the EU from a deceased English estate?

  • The notary/lawyer is not aware of the EU Regulation or how it operates and the heirs convey the property to you. In this case the heirs have no title to the property and you get no title. This is the less likely scenario.
  • The notary/lawyer relies on an English grant of probate and the executors/administrators convey the property to you. The executors/administrators are not validly appointed because the English courts have no jurisdiction and you get no title to the property. This is the more likely scenario.

In both the above scenarios once you become aware of the position you should contact your notary/lawyer and your bank mortgage lender immediately. You should consider whether to stop paying your mortgage. If you do not have good title to the property it is unlikely your lending bank will have good title. Your notary/lawyer will be responsible for rectifying the position and indemnifying you against any loss. In the meantime you will not be able to sell the property as you will have no title.

Sykes Anderson Perry

We have the expertise to assist EU notaries and lawyers in this highly technical area. We can provide expert opinions on English law and ensure that the court order you obtain in your local jurisdiction is to the correct person. We are your partner in England.

July 2015

David Anderson
Sykes Anderson Perry Limited
www.saplaw.co.uk
david.anderson@saplaw.co.uk
+ 44 203 794 5959