Can you rent out an inherited property without completing probate?
I’ve been asked if a person can start renting out a property that he or she would inherit through a probate action. People are sometimes afraid of probate, but they don’t have to be. This question probably comes up a lot, and most people don’t take the time to ask, so I will address some thoughts on the issue below.
Before I get too far into this topic, I want to make sure that I say it at least once: Speak with a lawyer about whether or not to open probate. But, I have been asked, and it seemed like a good topic to write about, so I will share my thoughts on it below. (I am not a lawyer, please consult a lawyer regarding your specific situation. If you need a referral for lawyers I trust in Kern County, call me.)
First, if you have not had title transfer to your name, you have not inherited a property. You might think that the prior owner intended to transfer the property to you, but unless the title has been officially transferred, no one has “inherited” anything.
That being said, there are ways that you can rent it out without going through probate. You need to make yourself aware of all the risks that you face, which is why you should consult a lawyer. Below, I will cover some general thoughts that might apply.
California Code of Civil Procedure sections 321 through 325 establish the rules for adverse possession. Under these rules, it is possible to take ownership of a property without going through a probate process or a formal sale. If there are no persons who claim title or interest in the property, then this could be a low risk way to move forward without going through probate.
However, you risk loosing the property when a person who has lawful interest in the property sues to evict you from the premises if they make their claim prior to the completion of your adverse possession. (This process takes at least 5 years in California.)
During the time that you rent out a property owned by someone else, you can be found guilty of a crime called rent skimming. Rent skimming is defined in both the Civil Code (section 892) and the Penal Code (section 1170). This can carry financial penalties and jail time. Keep in mind that while the previous owner’s name is on title that the property is technically owned by someone else, so you may be liable for rent skimming penalties even though you believe the property would have transferred to you.
To avoid claims of rent skimming, you can talk to a probate attorney about how to inherit the property so that your ownership is recognized by the law.
Loosing the Property When a Creditor Opens Probate
Let’s assume for a moment that you are the only inheritor of the owners estate. And let’s assume that the property absolutely would go to you. What happens if the owner owed money to a creditor, and that creditor opens probate to collect against the estate?
Just because you don’t open probate does not mean that someone else cannot. If someone else opens it, then it is likely that they will not have access to the prior owner’s last will and testament. The court will apply default presumptions in settling the estate and may order the sale of the home to pay debts. To add insult to your injury, any leftover proceeds from the sale may be distributed to other people if there are other potential inheritors to the estate.
By starting a probate claim, you can get in front of this kind of problem. If the debt cannot be settled, then you can at least come up with creative ways to negotiate a solution that works for you on your terms. Filing probate helps to give you at least one way to be part of the conversation on what happens when the court needs to pay debts owed by the estate.
You are not required to open a probate claim. However, title will remain in the name of your deceased friend or relative, and this could cause other problems for you down the road.
If you evade complaints about rent skimming, you might be able to rent the property without penalty for long enough to claim true ownership through adverse possession.
You can evaluate your actual risks by consulting with a lawyer. You may find that the low cost of the consultation to get basic information is worth avoiding the risks that you face if you make a legal mis-step.
If you are afraid of speaking to a lawyer, because you think it will cost too much, then check out my page on whether probate is right for you.