Surely deceaseds' estates have to pay bills?

[ADress]

I am (reluctantly) a director of our residents' association. A small group of semi detached houses (freehold) with shared gardens and parking areas. We each pay a monthly service charge and use a managing agent to handle the administration.

The agents are pretty poor. It's just transpired that one of the houses hasn't paid since the owner died two years ago. The accounts department within the agent don't seem to think they need to pay as they are saying we need to wait for probate and that it isn't a problem because the house can't be sold until the debt is settled.

1. Probate has been granted and the house is now on the market
2. Surely it's not ok for an estate to just not pay bills? I am trying to understand what comms have been had, but presumably the gas and electricity companies don't just let things drift for two years? (Perhaps they do?)

I'm going round in circles with the agent, so I'm just trying to understand what could/ should be the right course of action.

Any debts have see to be paid by the estate. However, if the estate doesn't have enough cash to settle the bills, the creditors concerned may have to wait until any property has been sold. The executors are not required to stump up their own money to pay the estate's bills.

Also, if the estate is insolvent (i.e. debts exceed the value of the estate), there is a strict order the executors must follow in settling the debts. Unsecured creditors may not get any of the money owed to them in that situation.

My understanding is it is common for probate to be granted before bills are paid. The managing agents should/ will have notified the executors/administrators of the debt. They will then pay all estate debts in due course.

What you can’t know is how solvent the estate is and the executors/administrators maybe waiting to get a full picture of all debts before paying. This is because if all debts can’t be paid they need to pay debts based on priority.

@prh47bridge explained it much better.

Debts have to be paid by the estate but if the estate has no money it will come from the sale. You need to lodge the debt with the executor and possibly put a charge on the land registry though unless it's very high it's probably not worth it

Yes gas and electric companies will allow bills to wait until the estate has actual funds to settle them - which may be after the property is sold.

They will be paid when the estate is in funds

Thank you. Is it reasonable to charge interest on the debt? Trying to do the right thing by everyone else who has paid on time, the money should have been in the residents' account earning interest.

Consult a solicitor if needs be - you should have someone advising you on this type of thing.

Interest can be charged per the contract, generally

But also don't forget, this isn't someone who's refused to pay, they've died. Probate is horrendously slow atm

That would be fairly straightforward I would think - as soon as the solicitor receives the proceeds of the sale of the property, they deduct the service charges due and pay them to the management company.

I expect it happens fairly often.

Of course it's not reasonable. Why has it taken you two years to notice? The person is dead, not a cheeky fucker refusing to pay.

If the organisation has genuinely suffered a loss due to the unpaid bill - e.g. if the money would have been held in an interest-bearing account then the amount of interest it would have earned there - or if the bank account has gone into debt then the interest the bank has charged you - would be a reasonable expense for the estate to cover. It wouldn't be reasonable for the estate to cover punitive interest charged above and beyond the expenses incurred, because the delay isn't under the control of the executor

Might the managing agent be liable for losses if they have not used their best endeavours?
If that phrase is still used? But you get the idea.

I think charging interest is taking the piss a bit, but that's just my own feeling about it, not based on anything at all really.

I'm not a lawyer so absolutely not sure about this...but are you quite sure that the estate is liable for the charges you mentioned? What does the contract signed by the owner say?

I remember reading something previously about a case where legal advice was that maintaining the garden was for the benefit of the receiving beneficiary as opposed to preserving the value of the property, and therefore these expenses should not be paid by the estate. That probably wasn't to do with a group garden situation though, just a private garden.

As I said, I haven't a clue, just curious.
What do you do if someone refuses to pay the monthly charge by the way...or simply can no longer afford it?

When the house is sold the seller's solicitor will have to engage with the managing agent for copies of accounts etc. to pass to the buyer's solicitor.

That's the point where the agent should be telling them that unless they sign an undertaking to pay the overdue fees out of the sale proceeds they won't be co-operating with the sale.

It’s a bit unfair to charge interest. Usually these management accounts have expenses so they aren’t usually invested to make much money or you cannot release money easily: certainly ours isn’t.

Having just got private for an estate where I’m executor it took 3 weeks from application to granting, not 20 weeks as stated on the website. Simple estate and quick resolution.

An excellent summary of the situation.

I've dealt with two family estates. I was very surprised that for my wayward brother's debts, his bank wiped his overdraft immediately, without question, and also his credit card debts similarly were not required to be paid.

I guess if you wade in with ‘available’ money and pay things off, they’re not going to complain though.

In this remote situation though, OP, you presumably are not privy to their situation.

I don't know the ins and outs, but from the last time I chatted with one of the DC (there are two, coexecutors and beneficiaries) it sounds like the estate is solvent. The house is on the market for £800k and was owned outright, that much I do know. Obviously I have no visibility of any possible debts.

Each household owns an equal share of the communal grounds and as directors, we have to sign the share transfer whenever there is a sale. This does happen after a sale completes though so that feels too late for redress.

So far we have fortunately never faced a situation where someone can't / won't pay.

I will push the agent again to try and find out what comms they have had. The DC don't visit anymore and I don't want to talk to them directly anyway because I only know them in passing and feel this needs to be done officially.

The amount owed is already equal to over 10% of our total annual income from residents so we can't ignore it.

Does anyone know, if we want to officially lodge the debt, what's the process and with whom do we lodge it? The agents could contact the sellers' EA who would have their solicitor's details but I don't know if that's the right route.

(And yes, I know the agent should know this, but they are truly poor)

Seems you're keen to lodge the debt despite having been told it will be paid by the estate in due course

I've only been told it will be paid in due course by the inept accounts department at the agents who can't even keep accurate track of a pretty basic and small budget. The same person who has taken two years to tell us it's not still being paid monthly and who can't tell us if the executors are responding to any comms. I don't trust them one bit and feel it's important to take steps now to ensure no bigger issues in future.

If probate has been granted you can download a copy for £3 and contact the executors direct

Thank you, that's helpful to know.

You should definitely ensure the executors know about the debt. I'd instruct the agent to send a letter requesting payment. I'd also charge interest.

My DM died last year. My DB and I were executors and were able to pay bills from the estate via DMs bank who changed it into an executors bank account.

Utility bills, we just kept the direct debit going. Her factor fees for grass cutting, estate upkeep, we just paid the bill as mum would have done. We didn’t wait for probate to do this.

We weren’t offended by receiving a bill. We understood we were responsible to act on our late mother’s behalf. It was just part and parcel of our duties. Make sure her executors are aware. They may be more than happy to pay.

Executors should surely be paying the bills for upkeep and reclaim the money back from the estate when probate is granted.