Buying a flat from an heir: what to check before the deal

Estate agents call such properties "fresh inheritance" and usually sell them at a discount. The discount is the price of the risk, and a buyer should understand exactly what he is being paid for.

Where the risk comes from

An heir's title arises on the day the succession opens, and the certificate of inheritance merely confirms it. The problem is that, at the moment the certificate is issued, the notary knows who the heirs are only from what the applicants have told him.

An heir who appears later is entitled to apply to have the time limit for accepting the inheritance restored, if he missed it for a valid reason and applies within six months after that reason ceased to operate. The court may then declare the certificate invalid and redistribute the estate. The transaction with the flat is challenged along with it.

A separate category is heirs entitled to a compulsory share: minor and incapacitated children, an incapacitated spouse and parents, and dependants. Their right does not depend on the will.

What to check before the deal

The basis of the inheritance. A will, or the statutory order. If there is a will, you need to understand whether anyone is entitled to a compulsory share: the deceased may have left minor children from another marriage or an incapacitated spouse.

The time since the succession opened. The more time has passed, the calmer things are. The first three years are the zone of heightened attention; after that the risk falls but does not disappear, since the time limit can be restored later in exceptional cases.

The deceased's family composition. An archive extract from the house register, information on marriages and children. This is not public information, so the seller requests it and the buyer checks that it is complete.

Any court disputes. The case database of the courts of general jurisdiction under the names of the deceased and the heir, the bailiffs' service website, the insolvency register. The seller's own insolvency is a large separate subject: the deal falls into the suspect periods.

Renunciations of the inheritance. If someone has renounced, the renunciation must be notarised and unconditional.

Registered occupants. A right of use may survive in favour of a beneficiary under a testamentary bequest — a rare but unpleasant storyline: the person is not the owner, yet cannot be evicted.

What makes the deal safer

Notarial form. Not compulsory, but useful: the notary checks capacity, explains the consequences, and his actions can afterwards be challenged separately. A notary is liable for the transaction he certifies, and that is an additional line of defence.

The real price in the contract. Understating the price to save tax is a common request from sellers and the worst thing a buyer can do. If the transaction is set aside, what comes back is the sum stated in the contract, not the sum actually handed over.

Settlement through a letter of credit or a notary's escrow account. It leaves a trail and confirms payment. A receipt for cash is the weakest evidence there is.

Representations as to circumstances. Article 431.2 of the Civil Code. The seller states in writing that there are no other heirs, no disputes, and no breach of any compulsory share, and is liable for inaccurate representations by way of a contractual penalty and damages. This is not a guarantee that you keep the flat, but it is a serious lever for getting the money back.

Title insurance. It insures the risk of losing title. It costs fractions of a per cent of the value per year and covers precisely the scenario for which all the checking was done in the first place.

If there is only one heir and he assures you there are no others

This is the most common set-up. You still have to check everything, but one simple device is added: an extended statement by the heir in the contract listing all the known relatives of the deceased and confirming that there are no other persons entitled to the estate.

Such wording is useful not in itself, but because in a future dispute it shows that the buyer acted with care and that the inaccurate information came from the seller. The buyer's good faith affects the outcome of the case and the ability to recover damages.

What to do if an heir turns up

Do not panic and do not hand over the keys on the strength of an oral agreement. A claim for recognition of title and recovery of the property is decided by a court, and a good-faith acquirer has a defence: property is not recovered from him if it was acquired for value from a person who had no right to dispose of it and the acquirer did not know of that, save where the property left the owner's hands against his will.

In practice the outcome depends on the evidence of care taken: which documents you checked, what you requested, how you settled the price. The file assembled before the deal becomes the main argument.

This material is for information only and does not replace advice on a specific matter.

If you are buying an inherited flat and want to assess the risks in advance, write to us — the first consultation is free of charge when you engage us.

Vladimir Kovalev — lawyer, founder and managing partner of Kovalev & Partners LLC