Michelle and Andrew were both the beneficiaries and executors of their mother’s estate. When Michelle and Andrew’s mother died, she left her only asset, the family home, to them both, equally.
Michelle wanted to buy Andrew’s share in the family home, but she could not raise the finance. Instead, Michelle suggested they tenant their mother’s home until she could afford to buy the property. Initially, Andrew was not opposed to this plan but, when Andrew’s financial circumstances changed, he decided he wanted to sell the property.
Michelle did not agree. About eight years after their mother died, Andrew applied to the court to have them both removed as executors and have a trustee company appointed to take over the administration of their mother’s estate.
In July 2020, the trustee company replaced Michelle and Andrew as executors and asked them both what they wanted to happen to the property. Michelle said that she wanted to keep the property and Andrew said he wanted the property sold. Michelle still could not afford to buy Andrew out of his interest in the property.
When the trustee company took over, they discovered:
- the insurance had lapsed
- the property required maintenance
- no tax returns had been made for the income earned by the estate while the property was tenanted.
In November 2020 the trustee company had the property valued by a registered valuer who valued the property at $405,000. A builder’s report identified considerable problems with the property.
The trustee company continued talking to Michelle and Andrew asking them if they could agree about what would happen to the property until, in April 2021, the trustee company put the property on the market, advertised ‘as is where is’. Both Michelle and Andrew were concerned that the ‘as is where is’ property description would adversely affect the purchase price.
Michelle complained to FSCL. She was concerned that the trustee company were selling the property too quickly and too cheaply. Michelle said the trustee company refused to listen to her suggestion that the property be tenanted until she was in a position to buy out Andrew’s share. Andrew complained that the trustee company had taken too long to put the property on the market, the longer the trustee company delayed the more it appeared to be costing the estate.
After a six-week marketing period, the property sold for $405,000.
Dispute
Michelle and Andrew complained that the trustee company had sold the property for too little. Although the property had been valued at $405,000 in November 2020, it was now June 2021 and property prices had increased in the interim. Michelle continued to complain that the trustee company should have tenanted the property to give her time to raise the funds to buy Andrew’s share.
Andrew complained that the property should have been sold the previous year. In addition, Andrew complained that he had travelled for about five hours to attend a meeting with the trustee company only to discover the person he was to meet was ill and no one else was available.
Both Michelle and Andrew complained about trustee company’s fees to administer the estate.
The trustee company said they were obliged to explore one beneficiary buying the other beneficiary’s share of the property, but said they were not prepared to tenant the property. The trustee company considered $405,000 was a realistic sale price taking into consideration the valuation and the builder’s report. Given the work involved in administering the estate, the trustee company said their fees were reasonable.
Review
The trustee company had been appointed to finalise Michelle and Andrew’s mother’s estate. Although it was reasonable to give Michelle and Andrew one final opportunity to buy the property, we considered the months of negotiating were unnecessary. The property could have been put on the market shortly after receiving the valuation and builder’s report in November.
We did not consider that the trustee company was obliged to tenant the property.
Bearing in mind the valuation and the builder’s report, we were satisfied that the ‘as is where is’ description and eventual sale price were not unreasonable.
The trustee company noted there had been substantial work arranging insurance and that the estate did not have an IRD number and no tax returns had been submitted, even though the house had been tenanted before the trustee company took over. Correcting these two issues took a considerable amount of work.
After discussion with the trustee company, Michelle, and Andrew, we recommended the trustee company should:
- refund some of the fees they had charged, the trustee company offered $2,000 which on balance appeared reasonable to us
- refund $600 in costs that had been attributed to responding to the complaint
- pay $500 each to Michelle and Andrew for the inconvenience associated with the missed meeting.
Resolution
Andrew accepted the recommended outcome but, after issuing the final recommendation, Michelle became extremely unwell and was unable to respond within the usual one-month period.
Insights for consumers
From time to time, we receive complaints where a trustee company has been put in the difficult position of having to administer an estate where the beneficiaries disagree about the distribution of assets. Disagreement among beneficiaries almost always leads to additional costs for the estate. We encourage beneficiaries to, as much as possible, agree on a way forward and give clear directions to the trustee company to allow them to get on with their job of realising and distributing assets.
