If you are buying or you already own a leasehold property and the freeholder is absent or cannot be identified, this can cause problems. We take a look at the situation and how to deal with the difficulties it can create.
The freeholder, also referred to as the landlord, has a range of obligations in respect of the property and the tenants. For example, in a block of flats, the landlord is responsible for enforcing the restrictive covenants contained in the lease, for arranging buildings insurance and for having maintenance work carried out.
The freeholder can also be approached if the leaseholders want to extend their leases, take over the management of the flats or purchase the freehold.
Without a freeholder, problems are likely to arise, particularly if the leaseholders disagree over issues. In addition, mortgage lenders will often be reluctant to lend where a freeholder is missing. These difficulties can reduce the value of a property and make it harder to sell.
Extending your lease or buying the freehold
As a leaseholder, you will usually have a legal right to extend your lease. Alternatively, if at least half of the leaseholders in a block of flats want to work together to buy the freehold, this is also an option. However, without a freeholder, the process is less straightforward.
Obtaining a vesting order
Even if your landlord is absent, it may still be possible to extend your lease or purchase the freehold. You will need to ask the court for a vesting order. This will allow you to extend the lease or take over the freehold without the landlord’s agreement.
To secure a vesting order, you will need to show the court that you have made every effort to locate the landlord.
If a vesting order is made, your case will then be transferred to a specialist property court known as the First-tier Tribunal (Property Chamber). This court will decide on the price that you will need to pay to extend your lease or purchase the freehold. This is paid into court, so that should the freeholder ever be located, they can be paid.
Buying the freehold
Buying the freehold can eliminate the problem, as the freeholder would no longer be needed. While you and the other leaseholders who want to join in the purchase would have to pay a premium, you would not need to pay the freeholder’s legal costs as you normally would with a freehold purchase.
Owning the freehold has several benefits, including:
- As leaseholders, you can grant yourselves long lease extensions with no need to pay a premium for this
- You could take over the flat management and decide:
- What maintenance to have carried out
- When to have work done
- What quote to accept
- How much service charge to pay
- How much to put aside in a sinking fund for future large items of expenditure
- What buildings insurance to buy
- Ground rent could be eliminated
- You can change the rules, for example, no need to pay for consent to alterations or you could allow pets at the property
- No risk that the landlord will sell the freehold on to a company that intends to try and make a profit from it
A leasehold property could be worth more if it is sold together with a share of the freehold.
You need to bear in mind however that there are some restrictions on buying the freehold, including the requirement that at least half of the leaseholders must join in the purchase. If they do not wish to do this, you will have the ongoing problem of an absentee landlord. This could make selling the property problematic.
Contact us
If you would like to speak to one of our expert property lawyers, ring us on 0333 3055 189 or email us at info@lpropertylawyers.co.uk
