What to do when a tenant passes away

The death of a tenant can not only be emotionally challenging, it can have serious financial ramifications for the landlord. Most property investors cannot afford to be without rental income indefinitely, making it important to understand protocols and procedures to follow when dealing with tenant death.

What are the obligations and requirements when a tenant pass?

Agents must follow the NSW RESIDENTIAL TENANCIES ACT 2010 - SECT 108 for appropriately handling tenant deaths at rentals including serving notices, terminating leases, returning bonds, disposing of tenant possessions and disclosures. Failing to do so, could pose legal issues.

The Lease

When a tenant dies, the lease does not automatically terminate, nor does the landlord have the right to immediately take possession of the property or remove the tenant’s belongings.

Rent

The landlord is entitled to rent, paid from the bond, the deceased estate or form a co-tenant, until the lease ends and to regain the property in the same state it was in at the start of the lease (with fair wear and tear expected).

What to do if a sole tenant passes?

If a sole tenant passes (the only tenant on the lease), you must follow NSW state procedure for ending the lease and returning the bond. The deceased tenant’s property, debt and contracts transfer to the estate or next-of-kin, including the rental agreement.

What to do If a co-tenant passes?

If a co-tenant dies (joint tenant) this does not automatically end the lease either. The remaining tenant can stay on and their rights and responsibilities continue under the tenancy agreement. However, if the co-tenant wish to leave, you can negotiate with them to end the lease early and take vacant possession.

NSW State procedure for ending the lease and returning the bond

NSW RESIDENTIAL TENANCIES ACT 2010 - SECT 108

Death of tenant

(1) On the death of the sole tenant under a residential tenancy agreement, either the landlord or the legal personal representative of the tenant may give a termination notice to the other person.

(2) The termination notice may specify a termination date that is before the end of any fixed term of the residential tenancy agreement if it is a fixed term agreement.

(3) The Tribunal may, on application by a landlord or the legal personal representative of the deceased tenant, make a termination order if it is satisfied that a termination notice was given in accordance with this section and that vacant possession of the residential premises has not been given as required by the notice.

(4) The legal personal representative of a deceased tenant who is given a termination notice by the landlord may give vacant possession of the residential premises at any time before the termination date specified in the termination notice.

(5) The estate of the deceased tenant is not liable to pay any rent for any period after the legal personal representative gives vacant possession of the residential premises and before the termination date. (1).

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Who is responsible for vacant possession and cleaning?

The next-of-kin/executor is responsible for the deceased’s rent and for proving vacant possession. They need to deal with the tenant’s possessions and arrange cleaning of the property, including any specialist cleaning if required.

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How landlord insurance can respond?

Most landlord insurance policies will respond to claims relating to tenant death, but there are varying levels of cover, inclusions and exclusions. It pays for landlords and agents to check the policy or contact their insurer to see what is and isn’t covered.

Landlord insurance may respond to loss of rental income in circumstance where the sole tenant passes and landlords face prolonged periods without rent due to time required to re-instate the premises, track down next-of-kin, or if the state trustee is made responsible.

Landlord insurance may respond to repair costs of the next-of-kin or executor fails to cover the bills. If a co-tenant fails to continue paying the rent, an insurance claim may be possible under a different section of the policy, such as rent default, to cover the rental losses.

How to assist your landlord with an insurance claim?

Secure the property as soon as you are notified of a tenant’s passing (and once access is permitted);
Make sure the doors and windows are locked and ensure any pets are taken care of
Take a witness with you when you enter the premises and video the property and its condition
Don’t let anyone enter the property or remove anything
Once you are advised of the executor (sight proof), provide them with a key as it is their responsibility to take charge of the tenant’s personal property

You should also:

Contact their insurer to check cover inclusions and what paperwork is required
Open the lines of communication with the deceased tenant’s executor or next-of-kin so you can discuss transitioning the rental property back to the owner.
Ensure the landlord gets written notification of a tenant’s death
Liaise with the executor or next-of-kin about vacating the property and disposal and removal of the tenant’s possessions.
When the property is vacated, have the home cleaned (specialist cleaning may be required) of the executor or next-of-kin has not already done so
Keep all receipts
Document all contact with the deceased’s executor or next-of-kin and keep excellent records about any actions you take regarding the property
Advertise the property for re-leasing as soon as practicable and keep written evidence of advertising activity
Once the property has been re-let, assist the landlord to submit an insurance claim with relevant supporting documentation.

This article originally appeared in Elite Agent, by Sharon Fox-Slater.

References:

Australasian Legal Information Institute. (n.d.). RESIDENTIAL TENANCIES ACT 2010 - SECT 108Death of tenant.

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