Can a Life Tenant Sell the Property?

A life tenant can sell the property subject of a life estate if the remainder beneficiary agrees or if the court grants his petition to sell the property.

How a Life Estate is Created

A property with a life estate is normally created using a life estate deed. In this deed, the grantor gives a person called the life tenant the right to the use and enjoyment of the property for the duration of the life tenant’s lifetime, and upon the life tenant’s death, full ownership is consolidated with the remainderman. To create a life estate deed, words expressly providing for the use, enjoyment, and benefit of the property during the life tenant’s lifetime is required. Simple words such as the transfer of property “subject to the life estate of” is also sufficient.

Usually, it is the grantor who transfers the property to the remainderman or remainder beneficiary, subject to the grantor’s life estate. This arrangement is usually found among parents and children, where the parent transfers the property to the child, subject to the parent’s life estate. This allows the property to avoid the expensive costs associated with probate courts.

Another way of creating a life estate is by last will and testament or trust. In this case, the testator or grantor, upon his or her death, will leave the property to the surviving spouse for the lifetime of the surviving spouse, and upon the surviving spouse’s death, such property will transfer to the remainder beneficiary who are usually the children, either from the existing and/or previous marriage.

Selling Property Subject to a Life Estate

Property subject to a life estate may be sold either by agreement between the life tenant and the remainder beneficiary or by petitioning the court for the sale of the subject property by either party.

The life tenant and remainder beneficiary may agree to sell the property with the proceeds divided amongst them in a proportion agreeable to both parties. This is the easiest way to sell property subject to a life estate.

However, there may be times when a life tenant would like to sell the property because he would like to move to another state, or the remainder beneficiary would like to sell the property because he does not want to wait for the life tenant’s death to use the property, and the other party does not agree. In this case, either the life tenant or the remainder beneficiary has the right, under RPAPL § 1602, to petition the court where the property is located for the sale of the property.

When an interested party, such as the life tenant or remainder beneficiary, petitions the court for the sale of property subject of a life estate, the interested party must show that the act is expedient. Expedient is defined as characterized by suitability, practicality, and efficiency in achieving a particular end; fit, proper or advantageous under the circumstances. A petition has been granted as expedient where the purchase price was well in excess of the appraised value; the rent was insufficient to pay the taxes; the house was unoccupied; and the life tenant would have to expend a considerable sum of money for taxes, insurance and maintenance of the house. Matter of Sauer, 194 Misc.2d 634 (Sur Ct, Nassau County 2002), citing Matter of Gaffers, 254 App Div 448, 450.

Dividing Sales Proceeds Between the Life Tenant and Remainder Beneficiary

Under RPAPL § 967, a life tenant is entitled to have a proportion of the proceeds of the sale in such manner as the court deems calculated to protect the rights and interests of the parties. Determining the value of the life tenant’s interest will consist of identifying the life expectancy of the life tenant from the date the life estate was established and using an actuarial table to determine its present value. In New York, the Appellate Division First Department has approved the calculation of the value of a life interest based upon the life estate and remainder interest table promulgated by the Department of Health and Human Services Health Care Financing Administration.

Still, the life tenant is also liable for his share of closing costs, transfer taxes, and real estate broker’s commissions and outstanding real estate taxes due until the extinguishment of the life interest.

Petitioning the court for the sale of property subject to a life interest can be complex. If there is any disagreement between the life tenant and remainder beneficiary regarding the sale of the property, it is important to seek the advice of an experienced life estate attorney to know your options and to be adequately represented in any petition to the court for the sale of such property. Should you need assistance, we at the Law Offices of Albert Goodwin are here for you. We have offices in New York City, Brooklyn, NY and Queens, NY. You can call us at 212-233-1233 or send us an email at [email protected].