ABSENTEE FREEHOLDER
For flats, the person responsible for matters like insurance, repairs and external maintenance is ordinarily the freeholder. However, if flat owners find themselves dealing with a missing freeholder it can create serious challenges. Buildings may suffer from neglect especially when leaseholders struggle to agree on how to manage things without a managing agent or freeholder.
Being lumbered with an absent freeholder can also make it difficult to sell flats, as potential buyers will hesitate if they know the management is poor or non-existent. Some mortgage providers will even refuse loans altogether. The situation becomes more precarious as the remaining lease length gets shorter – leases below 85 years are particularly unattractive when it comes to mortgage eligibility.
For leaseholders facing an absent freeholder situation there are solutions available under the Leasehold Reform, Housing and Urban Development Act 1993. Individual flat owners can extend their leases or they can collectively decide to buy the freehold. Courts can grant a Vesting Order to deal with absent freeholder situations and the amount for acquisition determined at First tier Tribunal.
Our panel of valuers are experienced in leasehold reform and handle a significant number of cases each year. They possess sufficient knowledge of legislation and valuation processes to care for diverse clientele including investors and property businesses alike. If you're looking for assistance in obtaining the ownership of your building by way of collective enfranchisement, then we encourage you to contact us for guidance.
Frequently asked questions
What happens if the freeholder is absent?
When it comes to extending the lease via statutory means it usually involves serving a Section 42 Notice on the landlord. However, there may be cases where you're unable to locate or contact the owner after unsuccessful attempts via the property title summary available at the Land Registry. Additional steps may therefore need to be taken.
To request a Vesting Order from the county court you will need to demonstrate that you have made efforts to find the missing owner. This includes taking several measures:
- Local Newspaper: place two advertisements in the newspaper requesting information about the freeholder’s whereabouts.
- Search Agent: hire a search agent who can actively search for and locate the owner.
- Last Known Address: visit the address of the owner to gather information or try to determine their current residence.
- Probate Records: examine probate records for any information about the status of ownership.
Once these steps are completed you will need to have the premium determined at First tier Tribunal. In cases where it remains unknown where exactly the freeholder is located there is a possibility that you can obtain a lease extension via a Vesting Order granted by the courts.
Are there alternative courses of action?
An alternative option for owners to collectively purchase their freehold is available through a provision in the Landlord and Tenant Act of 1987 (Part 3). This can be particularly advantageous if leases have less than 80 years remaining, as it tends to be more cost-effective compared to alternatives. This legislation grants the courts the authority to issue an Acquisition Order if the landlord fails to fulfil their obligations relating to maintenance, building repairs, insurance or management. Similar to the provisions in the 1993 Act, the amount payable under the 1987 Act is determined by First tier Tribunal.
The 1993 Act requires participants with leases under 80 years to include 50% of "marriage value" in their premium calculation, whereas this requirement does not apply under the 1987 Act. Marriage value refers to an increase in value resulting from leaseholders being able to grant leases after acquiring freehold ownership and often forms a portion of the premium paid. However, under the regulations set out in the 1987 Act, only the value of freehold interest is considered without any provision for marriage value.
As a result, when dealing with leases that have less than 80 years remaining it is advised to pursue an Acquisition Order under the provisions of the Landlord and Tenant Act of 1987.