Property undervalued for probate. Sold for 50% more. Big CGT bill

Farmboy

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An estate agent valued a property for probate. The value was accepted by the Probate Office and by Revenue. The property was sold immediately after grant of probate with no improvement or change of circumstances. The price achieved was 50% above the valuation. This turned out to be because the estate agent used agricultural value only. But the property was an essential requirement of the County Council for its Development Plan dating back six years before the date of death. The County Council was the buyer. The estate agent did not consider the relevance of the property to the Development Plan in the valuation.

Revenue decided CGT was due on the 50% by which the sale price exceeded the valuation.

A complaint about the estate agent to the IPAV was rejected as it was not a regulatory body, only a membership body. A complaint to the PSRA was rejected as valuation was not a matter regulated under the PSRA legislation.

How can the estate agent be called to account for making a valuation for probate which did not take into account an overwhelmingly significant influence on the true value of the property?
 

Palerider

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They can't, it was a valuation, their opinion on a given day.

Who were the executors, are you one.
 

Farmboy

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Unfortunately I am not an executor. A brother and sister were. The estate was divided between the five of us. The executors take the view it couldn't be helped. But it could as the property could have been put on the market pending Probate with the sale price being used as the Probate Valuation and Probate then fast-tracked to let the sale close. The Probate Office offers this facility. Their solicitor did not advise them this was a possible route.

So I'm trying to hold the estate agent to account for the undervaluation caused by ignoring or not being aware of the County Development Plan. Revenue said they rely on an estate agent valuation and apply tax accordingly.

Yes, IPAV has told me that an estate agent valuation is merely an opinion. But Revenue takes it as an absolute guide to their decisions as they're not in the business of second guessing a 'professional' valuation.
 

john luc

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A common occurrence is this. Be interested to see how you get on with this.
 
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cremeegg

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A crystal clear instance of professional opinions being legally worthless. You just have to suck it up.

Did the EA refer to the county development plan in his report, if not he should have.

If you send the EA a solicitors letter threatening to sue for your loss and threaten to report the matter to his professional indemnity insurers you will have his full attention.

He will probably ignore that, then all you can do is sue or not, but I doubt it would be a wise move.
 

llgon

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The executors take the view it couldn't be helped.
So I'm trying to hold the estate agent to account
You were a third party to this transaction. Even if there is a case to be made against the estate agent I don't see how you are in a position to make a complaint against her.

You are also unhappy with the advice given to the executors by their solicitor. Are you considering making a complaint yourself to the Law Society about this?

Your complaint appears better directed towards the executors.
 

Thirsty

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But hold on a minute - even with the CGT, you still received a bigger cheque with the higher sale price.

Would you have preferred the property to have sold for the lower figure?
 

Brendan Burgess

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I wonder would Revenue revisit this?

Did you speak to a tax advisor?

If a genuine error had been made in the valuation which appears to be the case, then they might consider it.

This happens a fair bit. To keep CAT down, the valuer keeps the value down. But then the estate gets hit with a CGT bill.

Brendan
 

john luc

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But hold on a minute - even with the CGT, you still received a bigger cheque with the higher sale price.

Would you have preferred the property to have sold for the lower figure?
This response falls into the view that the taxman is something to be deferred to and is an honourable institute. When someone leaves somebody an inheritance they don't think,hymm must think of the taxman too
 

Sunny

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That is unfortunate alright. Rather than threatening the estate agent, I wonder could you ask him to admit that he based his initial valuation on incomplete information and was never a true value. I have no idea if Revenue would take this it into account but I am not sure you will have much luck going down the legal route...These valuations are usually very clear that they are just opinions and it is why some people get more than one valuation in cases like this.
 

Thirsty

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some of you are missing the point here.

The OP was going to get the market price for the site anyway, irrespective of the valuer's valuation.

By getting the value wrong, the OP ended up with a tax bill which he would not otherwise have had to pay.

Brendan
Ah, right. see what you mean.
 

elcato

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But it could as the property could have been put on the market pending Probate with the sale price being used as the Probate Valuation and Probate then fast-tracked to let the sale close. The Probate Office offers this facility. Their solicitor did not advise them this was a possible route.
Sorry for attacking the legals here but this is the nub of your problem. Your solicitor should have advised this. In a recent personal case the first thing the solicitor advised was to wait until the property is sale agreed before applying for probate.
 

Thirsty

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"...wait until the property is sale agreed before applying for probate. "

In an instance for which I was executor the beneficiaries asked for the property to be put into their name so they could handle the sale themselves. In the end it sold for €10k less than valuation, so I don't know what happened tax wise (and they would have had to pay tax).
 

mf1

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For what it's worth.....

OP's strategies could be as follows:

Ask the executors to submit a Corrective Affidavit

See note from Revenue

In which conditions should you submit a CA26?
You should only submit a CA26 in order to amend material errors or omissions in your original CA24. It should not cover events that happened after the date of death, such as where a property’s value is reduced. Fluctuations in the property market are not considered to be material errors.

If that does not work, consider suing the Executors, for failing to achieve maximum value for the beneficiaries, who can then counter sue their solicitor, for not advising them to put the property on the market, to fix the value, prior to applying for Probate.

I think the OP is misdirecting his efforts by having a go at the EA- probably because he does not want to go after the executors? His siblings.

mf
 

DirectDevil

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This has the potential to turn in to a right mess.

In brief, it seems that the estate agent was negligent by providing a significantly erroneous valuation upon which the executors relied.
Are there going to be penalties and interest levied against the beneficiaries by Revenue over this ?
If so, IMHO those additional liabilities would be the basis for a proper professional indemnity claim against the estate agent.
This would be on the basis that additional penalties/interest were incurred as a direct consequence of the valuation error.

IMHO any of the beneficiaries who suffer additional penalties/interest have a stateable action against the estate agent in negligence.
Those "losses" would appear to flow directly from the negligent act.

The measure of losses is probably not going to be very high as the beneficiaries have to discharge their true liability to CGT anyhow.
 

john luc

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Would there not be in effect double taxation. Assuming inheritance exceeds allowance then excess is taxed at 33%. If part of the sale price is first taxed as capital gain @33% then the balance is again taxed @33%
 

DirectDevil

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Would there not be in effect double taxation. Assuming inheritance exceeds allowance then excess is taxed at 33%. If part of the sale price is first taxed as capital gain @33% then the balance is again taxed @33%
I don't think that there could be a double tax liability.
The beneficiaries should only have to pay their true tax liability (plus any penalties and interest if applicable).
Conceptually, this should be the discharge of their proper tax liabilities but in two stages namely the payment of the first erroneously calculated liability and then the balance.
 
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