Vesting Orders and extending your lease – the solution to Absentee Freeholders – Specialist Solicitors
Leasehold update – On November 27th, 2023, the Government introduced the Leasehold and Freehold Reform Bill – but as at November 2024, we still don’t have a date when the Bill may be implemented.
Click here to read the Leasehold Reform Latest News
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Missing freeholders – the very real problems
Having no contact with an absentee freeholder, and with no way to track them down, can be a major problem if you own a leasehold flat. And that’s not just limited to the inability to negotiate lease extensions. But there is an answer – the vesting order (see below)
Why having a missing freeholder potentially so difficult? Here are some of the real problems.
- Selling your flat can prove difficult. The average purchaser is often put off if there is a missing freeholder or absentee landlord – not least for some of the reasons set out below.
- Sourcing a mortgage can prove awkward. Lenders are simply not keen on lending where there is no sign of the freeholder, not least for some of the risks outlined below.
- There can be problems with enforcing covenants or other terms of the lease. Leases for long leasehold flats are not all the same – many contain quite different provisions relating to that particular block. One of the problems with missing freeholders is that enforcing the lease can be really tricky in their absence. This is one of the reasons why mortgage lenders don’t like missing freeholders
- Variation of the lease or getting your freeholder’s consent for internal alterations to your flat are impossible (without a vesting order – see below). Solicitors for any potential purchaser are likely to pick up on this issue – which can scupper many flat sales where the freeholder is missing
- Extending your lease is not possible without a vesting order. And the absence of an easy lease extension can also put off potential purchasers – who may not be keen on buying a flat with a short lease. Many lenders simply don’t touch short lease property at all – and many mortgage companies define short leases as anything with less than a 75 year term remaining. Even if you can sell a flat with a short lease – you’re almost certain to have to do at a significant discount
- Insurance risks. It’s likely that it is your freeholder’s responsibility to insure the building – so their absence, especially with the additional absence of a properly appointed management company, could mean that your entire building is not insured!
- Problems with maintainance. Freeholders will usually be responsible for maintenance and upkeep of the building. Even if managing agents have been appointed, they may not be able to arrange or authorise necessary maintenance or repair work without the freeholder. And if your building is badly maintained, that could make not only living unpleasant, but make it much,much harder to sell at anywhere near the market price.
- Problems resolving leaseholder disputes. The absence of the freeholder is also likely to mean that there is no one available, or any easily accessible process for sorting out disputes between leaseholders.
What makes the problem of missing freeholders were awkward is that there is no specific service to available to try and track down your absent freeholder.
Our highly specialist leasehold team represents clients with lease extensions, lease enfranchisement and First Tier Property Tribunal applications both locally in Wiltshire, Hampshire, Somerset, Dorset and Berkshire and throughout England and Wales.
Missing freeholder? Don’t ignore the issue.
It is not unusual for leaseholders to regard a missing landlord as a minor issue. They may not be receiving requests for ground rent or service charges – and some leaseholders are even unaware that it is the freeholder who will usually be responsible for arranging buildings insurance for the building.
Some leaseholders may feel that in the absence of a freeholder to seek approval from, they can go about altering their flat without gaining the necessary consent. This is dangerous.
These issues are real – so our advice is simple. Don’t ignore absentee landlords.
Hunting Down a Missing Freeholder
So what methods can an experienced lease extension legal team like ours use to track down that elusive freeholder?
The first thing which has to be established is who exactly they are looking for. In legal terms, this person is called the “competent landlord”, and it is usually simply the person who owns the property’s freehold. It can also be a person known as the “head lessee” where dealing with properties which are sublet. Only this competent landlord has the legal power to agree to extend your lease.
The process begins by your lawyer serving them with the section 42 notice under the terms of the Leasehold Reform, Housing & Urban Development Act 1993 (as amended).
Your legal right to know the name and address of your landlord
Under another piece of legislation called the Landlord and Tenant Act 1985, any leaseholder has a legal right to know the name and address of their landlord. The Act also makes it an offence for a landlord not to respond to such requests for information within 21 days.
The first port of call for a lease extension lawyer when trying to find the competent landlord is looking through the register of freeholders which is held at the Land registry. There is a small fee for this service. Many lawyers also turn to the internet, and it is increasingly common to try to find landlords using information supplied by online directories and websites.
But what happens if you still can’t find your freeholder/head landlord?
Missing Freeholders and Lease Extensions – the Vesting Order is your the solution
Despite the problems that any missing freeholder gives rise to, there is an answer –legislation allows the leaseholder to apply to the County Court for what is known as a “Vesting Order” under the Leasehold Reform, Housing and Urban Development Act 1993.
This means that the County Court, in effect, can allow leaseholders to avoid the formalities of a statutory lease extension – in particular skipping the step of serving a formal s42 notice, which is usually the first step when extending a lease (or buying the freehold).
Vesting orders provide the solution to handling the problem of missing freeholders with regard to a number of issues including the following;
- lease extension
- freehold purchase or enfranchisement – leaseholders’ legal right to buy the freehold of their block jointly
- the Right to Manage under the Commonhold and Leasehold Reform Act 2002
- inadequate building maintenance and repairs – The First-Tier Property Tribunal has the power to appoint a block manager for a specified length of time (e.g. 3 years).
NB Vesting Orders are also really useful when you have found your freeholder. but at some stage they simply won’t cooperate – for example by failing to respond to your initial section 42 lease extension notice. In that circumstances we can threaten, and if necessary actually apply for a Vesting Orders – which would take the whole process entirely out of the freeholder’s hands. It’s such an effective tool that normally the simple threat of an application vesting order is enough to get obtain cooperation from the most difficult freeholder
My vesting order – what does it actually do?
The vesting order itself does not actually extend the lease or, in the case of enfranchisement, transfer the ownership of the freehold. But it does permit those steps to be carried out when once the value of the premium involved has been decided and that cash sum paid into court.
Vesting orders – the process
In general terms there are two steps involved in an application for a vesting order.
1. You will need to present evidence to the Court – which shows that you have done everything you reasonably can to track your freeholder down.
The kind of evidence which the Court will expect to see it’s likely to include the following;
- Freehold Office Copies from the Land Registry which state who owns the property and which gives the last known address of the freeholder.
- If the building is owned by a company, then you should also provide details of the registered address from Companies House along with confirmation on whether or not the company is still registered
- Proof that the freeholder is no longer living at the address which is held on record for him or her. This will normally involve proof that a formal notice has been sent to the freeholders registered address requiring them to confirm their this contact details.
- Try to contact anyone who has previously attempted to collect the ground rent or service charge – this might not be the landlord, but a managing agent employed by him.
- Evidence that you have sent a formal notice to the freeholder’s last known address requesting their current contact details
The court may well require additional evidence – the more you can do to show you have done your utmost to track down the missing freeholder, the better.
You might therefore consider providing the following additional evidence;
- a statement that a physical visit was made to the last address held on record for the freeholder, and that a forwarding address could not be obtained for him or her.
- advertising in the local press
- appointing a private investigator to try and get up-to-date contact details – we can help you with this
- trying to trace up-to-date contact details from any managing agents who have been involved with the building in the past, or solicitors who have been involved with any previous transactions in the block
- try to contact anyone who has previously tried to collect the service charge or ground rent on behalf of the freeholder
- checking probate records to see if the freeholder has died and to find out who is the new freeholder
2. After all of this evidence has been sent to the County Court, the judge then considers whether the application is in order – and that sufficient attempts have been made at tracing the missing freeholder.
The judge will then either make his ruling straight away based on the evidence he has seen, or set a date for a further Vesting Order hearing.
After the case has been proven, the leaseholder is then given the judgement, and they are then free to extend their lease or acquire the freehold.
Missing Freeholder, Your Lease Extension and the First-Tier Property Tribunal
Once you have your vesting order, you can then make an application to the First-Tier Property Tribunal, previously known as the Leasehold Valuation Tribunal.
The First-Tier Property Tribunal calculates what it feels to be a reasonable premium for the lease extension or freehold purchase. The applicant must then pay whatever sum has been set for the premium into court. Those funds remain “vested” in the court in case the missing freeholder reappears at a future date, when they become entitled to claim those funds – but they cannot reverse the lease extension or the transfer of the freehold to the leaseholders.
Often there is no need for an actual hearing when the Tribunal is dealing with an absentee freeholder. Often the Tribunal simply asks the leaseholder to supply required paperwork by a certain date. The documents they ask for will include:
· The valuation prepared by the leaseholder. You’re going to need to get an accurate valuation from a specialist lease extension surveyor of the reasonable amount to be expected for a lease extension (or in the case of freehold purchase for the enfranchisement premium). We can introduce you to a reliable experienced surveyor specialising in this area from our own informal panel of trusted valuers
· Copies of the lease
· The relevant County Court judgement
· The proposed TP1 form for the Land Transfer
Missing freeholders and lease extensions – the final legal work
Once the final order has been received from the First Tier Property Tribunal and the correct premium has been paid into court, your solicitor can then handle the legal side of the actual lease extension (or transfer of the freehold if it is in an application for an enfranchisement).
Click here to read more about the First-Tier Property Tribunal and how it works
Missing freeholders – the good news
Despite the very real practical problems outlined in the first paragraph of this page, there is a good side to having an absent freeholder.
Although the process is complicated, and you’re going to need a specialist solicitor, in the absence of a missing freeholder, it’s quite likely that you will obtain your lease extension (or enfranchisement) for a very competitive price. Why?
Lease extension and enfranchisement premiums are usually agreed on after negotiation between valuers for the freeholder and leaseholder. As a result, those premiums are quite often a compromise between the values put forward by both parties. With missing freeholders and a vesting order from the court, there is not going to be any negotiation.
So provided the premium valuation is reasonable and obtained from a specialist surveyor, you may well find that you end up with a lease extension and enfranchisement for noticeably less than you would have paid if the freeholder was actually involved. That has got to be good news.
Can I claim back the legal costs and disbursements of my vesting order?
There is further good news here. It is possible for the court to make an order that the legal costs and disbursements involved in obtaining your vesting order can be deducted from the premium monies you would otherwise have to pay into court to be held for the freeholder. And that applies whether you’re looking to buy your freehold or extend your lease. However, this kind of costs order is not automatic. It is entirely at the discretion of the judge. But because our team really understanding vesting orders and deal with them on a regular basis, we often successful in claiming back our client legal fees and third-party costs in this way
Missing freeholders, vesting orders, lease extensions and specialist advice
There’s some very simple advice when you are faced with a situation like this – don’t try to do things on the cheap. This is a complex area of law and very few surveyors or solicitors deal regularly with lease extensions or enfranchisement – let alone vesting orders. We do.
Click here to read some reviews of our lease extension solicitors from satisfied clients
The only way of making sure that the process runs smoothly and you get the result you need, is to appoint a both a solicitor and a surveyor who specialises in lease extension and enfranchisement. Our specialist five strong leasehold team have the experience you need – handling over450 lease extension and enfranchisement cases every year. We have plenty of experience of Vesting Orders and applications to the First Tier Property Tribunal. And in addition as part of our one-stop service, we have a panel of specialist valuers nationwide – so we can help you choose and appoint the right surveyor.
But don’t just take our word for this need for specialist advice. Here is a direct quote from the UK Government’s own Leasehold Advisory Service website, when it comes to applying for a vesting order.
“You are likely to require the services of a solicitor and a managing agent.”
Can Absent Freeholder Indemnity Insurance help?
Taking out an indemnity policy with a single one-off payment may sound the easiest answer, but has a number of drawbacks. These policies can cost as little as a few hundred pounds.
These kind of policies can provide a degree of protection if your freeholder does suddenly emerge and demands back payments of ground rent or objects to alternations you may have made without permission – or requires payment for providing such backdated permission.
What’s more, lenders don’t like these insurance policies, and many potential purchasers may not feel that any Absent Freeholder Indemnity Policy gives them sufficient protection. In addition, this kind of indemnity policy can’t deal with some of the practical problems such as maintenance and the need to insure the building, let alone lease extension and enfranchisement
Click here to read more about lease extension or leasehold enfranchisement.
FAQs
How to buy freehold from an Absent Landlord?
If your landlord or freeholder cannot be located, we can ask the court for a vesting order. This is an order that transfers the freeholder’s interest to you and the other leaseholders. Not all leaseholders need to join in the process, but you will need leaseholders from at least half of the flats to be eligible to apply for the freehold.
To obtain a vesting order, we will need to gather evidence that shows you have taken reasonable steps to try and locate the freeholder. This includes a range of documents, from copies of Land Registry and Companies House records to evidence that formal notices have been served and no response received.
The stronger the evidence, the more likely it is that the court will grant a vesting order.
The court will go through the paperwork and may ask for more information or it may grant a vesting order straightaway. A vesting order gives you the right to go through the freehold purchase process.
This starts with an application to the property court known as the First-tier Tribunal (Property Chamber). We will supply them with a range of information relating to your property, including a professional valuation prepared by a specialist freehold surveyor. The court will set the value of the premium that you will need to pay to buy the freehold.
Once you make this payment, the freehold can be vested in you and your fellow leaseholders.
How do I extend my lease with an absent freeholder?
The process for extending a lease is similar to purchasing the freehold, but you will not need anyone else to join in the process.
Again, you will need to put together evidence that the freeholder is absent and obtain a valuation of the premium for the extension. The county court can provide a vesting order and the First-tier Tribunal will then set the price that you must pay.
Your solicitor will be able to deal with the extension, ensuring that it is correctly drafted and registered.
What happens when a freeholder cannot be found?
If you own a flat, you and your fellow leaseholders will usually need to deal with administration and maintenance issues between you if the freeholder is absent. This is not ideal because the fact that you do not legally own the freehold can cause legal complications.
For example, you will need to try and handle any disputes that arise and share the cost of maintenance, but you will not have the legal right to take any enforcement action should it be necessary.
While you may be able to manage matters in the short-term, you are strongly advised to arrange for the freehold to be transferred to you and the other leaseholders. Not only will this give you the legal right to deal with issues such as arranging insurance and collecting service charges, it will also make your property more marketable.
What happens if a freeholder refuses to extend lease?
Most leaseholders have the legal right to extend their lease. If your freeholder refuses, your solicitor can write to the freeholder clearly setting out your rights and telling them that the next step will be to secure a vesting order on your behalf. This is often enough to prompt a freeholder to engage with the extension process.
If the freeholder still refuses, you can ask the court for a vesting order. Once you have a vesting order, you can ask the First-tier Tribunal to set a premium and your solicitor can complete the lease extension process.
