by Sinal Govender and Claire Keet, cofounders of life.file in collaboration with property specialists, Araujo Attorneys
“Buy an investment property,” they said. “It’ll be a fantastic long term investment,” they said. Before making this enormous life decision, it’s important to think about all the aspects of being a landlord. There’s a lot to consider - like calculating when you’ll start turning a profit, finding (and keeping!) a reliable tenant, handling a lease agreement, becoming a member of a body corporate, hiring a managing agent, dealing with burst geysers, furnishing (or not furnishing) your property. A lesser discussed item on the list is what will happen to your properties and tenants when you kick the bucket one day...
What actually happens to my tenants when I die?
The short answer is “nothing”. If you’ve got a proper lease agreement with your tenants then they should carry on occupying your property as if you were still around. The reason is that when you die, your estate is bound by the terms and conditions of any lease agreements that you had in place while you were alive. (A quick sidenote: your estate is made up of all of your assets (things or money that you own) and liabilities (things or money that you owe to others) on the date that you die. This includes your properties and any lease agreements you might have in place). Unless you’ve specifically included a clause in your lease agreement that says that “the lease terminates upon the death of the landlord”, then the tenants will carry on “as is” for the duration of the lease. Of course, it goes both ways - your tenants will still need to fulfil the terms and conditions of the lease agreement as they would do under normal circumstances.
Who takes over the leases with my tenants when I die?
First, your Executor will take over the administration of your estate when you die. Remember, your Executor is the person who you have (hopefully) appointed in your Will to wrap up your estate admin. Once your estate has been wrapped up, the rights and obligations of your lease agreements will pass to your beneficiaries (aka the people who’re going to inherit from you). If your beneficiaries accept their inheritance, then they’ll take over your lease agreements and take the reins as landlord.
Does someone need to tell my tenants that I’ve died? Who normally does this?
Definitely. It goes without saying that you won’t be able to tell your tenants about your “change of circumstances”. This is where your Executor comes in. They’re the person who should get in touch with your tenants and tell them about your death. If you had appointed a managing agent to look after your property and tenants, then your Executor should tell them (and the body corporate) that you’ve died. The reason it’s important that your tenants know that you’ve died is that they’ll now need to pay their rent into your estate’s bank account. This bank account will be opened and managed by your Executor.
How does it work if I die and have a managing agent overseeing my properties?
If you’ve appointed a managing agent to look after your property and tenants, then they’ll just carry on as is. (A reminder that your estate is bound by the terms and conditions of any agreements or rental mandates that you had in place while you were still alive). If any changes need to be made to the rental mandate that you had in place while you were alive, then it’s between your Executor and the managing agent to reach a new and mutual agreement.
How does it work if I die and don't have a managing agent overseeing my properties?
Your Executor, as the person looking after your estate admin, will take over and manage things. They’ll oversee your properties, together with your beneficiaries where it’s applicable. Once your estate is wrapped up, your beneficiaries will take over and manage the properties (and any tenants) they get as part of their inheritance. It will, of course, be up to your beneficiaries to decide if they want to carry on leasing the property or sell it once the lease is up.
What happens to my tenants if my estate takes a really long time to wind up?
Not much, really. Your tenants should carry on paying their rent and stay on until their lease expires. If your tenants decide they’d like to stay in your property, then they’ll enter into a new lease agreement with your beneficiaries. If your estate still hasn’t been wound up and the property still hasn’t transferred to your beneficiaries, then the new lease agreement will need to be signed by your Executor. The tenants could also decide that they don’t want to renew the lease, in which case they’ll just communicate this to your Executor or beneficiaries and move out when their lease expires.
What happens if my tenants stop paying rent after I've died?
If this happens, then your Executor can terminate the lease agreement in terms of the breach clause in the lease agreement. They might choose to give your tenants notice to vacate your property or even institute eviction proceedings. (Sidenote: reason #403 why you should always, always have a solid lease agreement in place with any tenant living in your property. Legal agreements (the good ones, anyway) should protect both sides equally, while managing expectations and providing a clear framework for how the relationship should go forward. It’s important to understand that a legal agreement is just that - an agreement between two people or entities. Get it right from the onset and you should set the tone for a mutually beneficial relationship and also safeguard against things going belly up).
What happens if my beneficiaries who inherit my leased properties don't want the tenants to live there anymore?
As the new landlords of your property, your beneficiaries will be bound by any lease agreements you had in place with your tenants while you were alive. Your beneficiaries can give the tenants reasonable notice to hit the road - but only in terms of the lease agreement. Once the lease expires, your beneficiaries could, of course, decide not to renew it.
What should I make sure to have covered in my lease agreements with my tenants in case I die?
Having a well drafted lease agreement in place is really important for lots of reasons. One big reason is that it’s the legal document that sets out what will happen to your tenants if (or when) you kick the bucket. Make sure that your lease agreement includes whether the lease agreement will continue or terminate “upon the death of the landlord”.
What property related documents will the beneficiaries of my leased property / properties need one day?
Current Lease Agreement
Managing Agents rental mandate, if applicable,
Tenants details & Fica information, if self-managed
Copy of Title Deed
If Sectional Title, then Body Corporate rules / levy information
Municipal Accounts
Property Plans
Home Owners Association rules / annual levy information etc
The long and the short of it is this:
Make sure that you have a properly drafted, legally sound lease agreement in place with all of your tenants.
Make sure that your lease agreements make it clear what happens to the agreement if you die one day.
In your Will, make sure that you leave your property to the people you want it to go to, as they’ll be the new landlords.
Make sure that your property documents are updated and safely stored in a well organised life.file.
Make sure that your Executor and beneficiaries have access to your life.file.
This article was written by life.file in collaboration with property specialists, Araujo Attorneys
Sinal Govender and Claire Keet are the co-founders of life.file, a female founded African startup and legal technology company. life.file is a subscription web app that helps users create, store and share a life.file of all the legal life documents their loved ones would need in life's worst moments. For just R348 per year, life.file helps users get their legal "ducks in a row". So much more than "Dropbox for Death", life.file encourages users to live an empowered, organised life by planning ahead for things "going pear shaped". www.lifefile.co.za
More articles by Sinal and Claire
Buying a property usually involves a bit of creative thinking. You walk into a show house and start to imagine it as a home - your home. Your mind’s eye paints feature walls, open plans the kitchen and pictures your life - and all its big, happy moments - unfolding in the space. The last thing you’re likely to be thinking is: “what happens if I buy this home and then... die?”. People don’t like to think about and plan for the worst bits of life, like dying. (Who can blame us?!). But death and property ownership is a pretty big deal that we just don’t talk about enough. If you own property, or plan on entering the market, here are some of the most important things to know about kicking the bucket when you’re a homeowner...