Selling an Inherited Warehouse or Estate Industrial Property

This page is for executors, administrators and heirs selling inherited commercial property: a warehouse, a plant or a truck yard in an estate, or industrial land in Pennsylvania. It covers who can sign and which taxes and waivers come up in Pennsylvania and New Jersey. It also covers a building that may be empty, leased or still housing the family business.

We buy industrial buildings from estates in Philadelphia, Bucks, Montgomery and Delaware counties in Pennsylvania and Camden, Burlington and Gloucester counties in New Jersey. We're part of a family-owned business that has been operating for over 15 years. We don't give tax or estate advice. The rules below come from the sources listed at the end, and the estate's accountant and the title company can tell you how they apply.

Who can sign to sell a warehouse that belongs to an estate?

An estate's personal representative is the executor when there's a will, or an administrator the court appoints when there isn't. Formal papers called letters show the court's appointment: letters testamentary when there's a will, and letters of administration when there isn't. The title company confirms who must sign the sale, so get the letters early.

Start with the deed, which shows who held title and how. If the deed names a company, the title company can tell you which of the company's documents it needs to confirm who can sign. In that case, the person who died owned a share of the company, not the building. New Jersey's Division of Taxation says no waiver is required for property owned by a bona fide partnership, an LLC or a closely held corporation. Shares of a corporation incorporated in New Jersey may still need one. Either way, the estate's accountant can tell you what the sale means for the estate's taxes.

Which taxes and waivers come up when an estate sells a building?

Both states set rates by the heir's relationship to the person who died. Pennsylvania charges 0% for a surviving spouse, 4.5% for children and other lineal heirs, 12% for siblings and 15% for other heirs, with charities exempt. New Jersey exempts spouses, children and other Class A heirs, but its real estate generally can't be transferred without a state tax waiver.

Pennsylvania

Pennsylvania's Department of Revenue says the tax is due at death and becomes delinquent nine months after it. If it's paid within three months of the death, a 5 percent discount is allowed. Property owned jointly between spouses is exempt. Ask the estate's accountant how the tax and the discount fit the closing date you're planning.

New Jersey

New Jersey's estate tax is no longer imposed for deaths on or after January 1, 2018. Its inheritance tax still applies. The amount depends on who the beneficiaries are and how they were related to the person who died. It also depends on the value of the assets and debts at death, what kind of assets they were, and whether the person lived in New Jersey.

The return, if one is required, and any tax are due within eight months of the death. An extension is available only for filing the return, not for paying the tax. Interest runs at 10% a year on tax not paid by then. Unpaid inheritance tax is a lien on New Jersey real property for 15 years from the date of death, unless it's paid or an acceptable bond is filed.

To transfer the real estate, the estate needs a tax waiver, Form 0-1, which only the Division of Taxation issues. A shorter route may be open if the whole estate passes to Class A heirs, owes no inheritance tax, and needs a return only to get the real estate waiver. The estate can then request the waiver with an affidavit instead of a return. A New Jersey resident's estate uses Form IT-L-9, and a non-resident's estate uses Form IT-L-9 NR. Other limits apply, so the estate's accountant can confirm whether the affidavit fits. Real estate that spouses or civil union partners owned as tenants by the entirety can go to the survivor without a waiver.

An owner who lived outside New Jersey but owned real estate there can still owe New Jersey's non-resident inheritance tax, and that real estate still needs a waiver. When the estate of someone who didn't live in New Jersey sells a building there, the state also collects an estimated income tax payment before or at closing. An exemption can apply, and our FAQ explains the payment.

Federal estate tax is a separate question, and the estate's accountant can tell you whether a federal estate tax return is needed.

How is the gain figured when you sell an inherited building?

The IRS says gain is figured from your basis, and the basis of inherited property is generally its fair market value on the date of death. The alternate valuation date is used instead only if the executor files a federal estate tax return and chooses it. If you sell the property for more than your basis, you have a taxable gain.

Here's how that works on a sample sale. Say the building was worth $1,200,000 when the owner died, and it sells for $1,250,000. The gain is figured from the $1,200,000 value, so before selling costs and other adjustments it's $50,000. What the owner paid for the building decades ago doesn't set the gain. If a company owned the building, what passed at death was a share of the company, not the building. Ask the estate's accountant how the basis rules apply then.

The value reported for state inheritance tax can matter here too. IRS Publication 551 covers the case where you didn't receive a Schedule A reporting the estate tax value of property you inherited. Then, it says, your basis can be determined using the appraised value at the date of death for state inheritance or transmission tax purposes. How the gain is taxed, and whether the estate or the heirs report it, is a question for the estate's accountant.

What if the heirs don't agree on selling the building?

When heirs disagree about selling, start with the will and the letters, which show who the court appointed as the estate's personal representative. If the heirs already own the building together, a co-owner can ask a court to end the co-ownership, which is called a partition action. A written as-is offer gives every heir the same number to weigh.

Chicago Title's glossary describes a partition action as ending the co-ownership either by dividing the property into separate parcels or by selling it and dividing the proceeds. A buyout or a sale the heirs agree on keeps that decision with the family. One heir can also buy out the others at an agreed price, and a written offer gives everyone a reference point for it. Our page on partner splits covers buyouts and who signs when several owners hold title.

The building while the estate settles

Settling an estate takes time. New Jersey's inheritance tax return is due eight months after the death, and Pennsylvania's tax becomes delinquent at nine months. Meanwhile the building keeps running up bills: property taxes, insurance, utilities and upkeep. If it's empty, the risks of an empty building apply too. The ISO commercial property form many insurers use limits coverage once a building has been vacant more than 60 consecutive days, so tell the insurer if the building is empty.

In Philadelphia, a commercial property vacant more than three months, with no construction under way or scheduled, needs a Vacant Commercial Property License. According to the City, the license costs $202 a year, and the owner posts a bond of $50,000 to $500,000 depending on the building's square footage. A letter of credit can be used instead. Our page on selling a vacant building covers the carrying costs and vacancy rules in more detail. Every Philadelphia sale also needs a Property Sales Certification, and what Philadelphia requires before a sale applies to an estate's sale too.

If the building has tenants, rent still has to be collected and deposits accounted for while the estate settles, and a buyer will ask for the leases. Our page on selling with tenants in place explains how leases move to a buyer at closing.

What if the family business operated in the building?

When the family business ran from an inherited building, the deed shows whether the owner held it personally or through a company. In New Jersey, the Industrial Site Recovery Act (ISRA) can be triggered by selling a building where a covered business operates, or by closing or selling that business. The sale agreement decides which equipment goes with the building.

ISRA counts closing operations as a trigger, including a temporary stop of more than two years. The owner or operator must notify New Jersey's Department of Environmental Protection within five days of closing operations or publicly announcing the decision to close, whichever comes first. For a sale, the notice is due within five days after the sale agreement is signed. If the business may be covered by ISRA, ask your environmental professional early. Our ISRA guide covers the ISRA triggers, and our page on retiring or selling the business covers selling a building when the company is closing.

What to have ready

• The death certificate and the will, if there is one
• The letters showing who the court appointed to act for the estate
• The deed, a recent tax bill and any survey
• Leases and a rent roll, if the building has tenants
• Insurance details, especially if the building is empty
• Environmental reports and anything you know about past uses
• Any date-of-death appraisal, and the estate's accountant's contact details

Selling an estate's building to us

Send the address and tell us where the estate stands. We walk the building with you or the executor and send a written as-is offer with the price, a proposed closing date and which costs each side pays. Nothing has to be cleaned out or fixed first. We charge no commission and no fees.

We can't promise a set number of days. When you sell to us, you choose the date, within the required steps and the due diligence period in our offer. For an estate, those steps include whatever the title company needs to confirm the executor's or administrator's authority and any tax waiver. How It Works covers each step. Related situations: co-owners who disagree, a vacant building and a building that needs repairs.