Absent Freeholders and your Lease Extension

Missing Freeholders – the problem

Being stuck with an absentee freeholder can cause real problems for leaseholders. Any property known to have an absentee landlord or freeholder, [especially if it only has a short lease term remaining], is fundamentally unattractive to mortgage lenders, and will significantly reduce the number of potential purchasers.

The knock on effect is that any potential purchaser will struggle to get a mortgage. As a result, marketing the property becomes very difficult.

Looking to extend your lease but can’t find your freeholder. Our specialist leasehold team can help. Call our team on FREEPHONE 0800 1404544 for FREE initial phone advice

How to solve the problem – the Vesting Order

When it comes to your lease extension, and you simply can’t track down your freeholder, the Leasehold Reform (Housing and Urban Development) Act 1993 helps out. In particular, it includes provision for avoiding the complex, costly and time consuming process of having to serve a statutory notice enforcing a lease extension in situations where a leaseholder needs to secure a lease extension on a property with an absentee freeholder.

The solution is an application for what is known as a “Vesting Order”.

The good news is that using this route is likely to mean the premium you pay for your lease extension will be lower, perhaps significantly lower, then you would have ended up paying to your freeholder under normal circumstances. And in addition you will not have to pay the reasonable legal and valuation costs of your freeholder

The bad news is that this process is complicated and time consuming. And it will involve additional legal costs of your own. However you may be able to deduct those additional legal from the premium payable into court for your lease extension.

Our specialist lease extension team can help you obtain a Vesting Order – just call us now on FREEPHONE 0800 1404544 for FREE initial phone advice.

Efforts to find the missing freeholder

Before going down the route of applying for a Vesting Order, the leaseholder as an individual or as a group will need to show that they have made reasonable attempts to track down the freeholder. See below for information about the evidence the court will require.

Identifying your competent landlord

One of the first steps taken by your solicitor will be to help you identify what is known as the ‘competent landlord’. Without getting too legally technical here, this basically just means the person who has the power to agree to and grant your leasehold extension for a further period of 90 years.

The competent landlord is the person who has the most significant interest in the leasehold property you reside in – almost always the actual freeholder themselves. But this could be a person known as a head lessee (this is something to discuss further with your lease extension solicitor if necessary).

Under the Landlord and Tenant Act 1985, you have a legal right to obtain the name and address details of your landlord. It is actually an offence for your landlord to fail to respond to you within a period of 21 days.

You are also entitled to inspect the register of freeholders at the Land Registry. This should provide you with the relevant recorded details of the freeholder for your property.

Absent Freeholders – applying for a Vesting Order

Your application for a “Vesting Order” will be made to the County Court. The County Court can also allow you to do without having to serve your missing freeholder with a statutory notice –  which is normally required when you apply for a lease extension.

What evidence will we need?

Evidence must be produced to the court to show that reasonable efforts have been made to trace the absent freeholder.

Such evidence must include:

1. Providing freehold Office Copies [available from the Land Registry] . These will include proof of the ownership of the property by the freeholder and will show his or her last known address. You are freely entitled to this information, and there is only a small fee.

2. Proving that the freeholder is no longer the owner of the property and has moved to another address.

3. Or alternatively, producing statements to the effect that a visit to the last known address of the freeholder has not resulted in the leaseholder obtaining a forwarding address.

We can assist you with making sure you have sufficient evidence of your efforts to trace the missing freeholder, and can, if necessary, appoint enquiry agents on your behalf.

Granting a Vesting Order

Once sufficient evidence has been produced to the County Court, the judge will either rule on the basis of that evidence, being satisfied that all reasonable efforts have been made to trace the absentee freeholder – or if the Judge is not yet satisfied with the evidence, the Court will set a date for a Vesting Order hearing.

The grant of a vesting order enables the leaseholder not only to extend their lease but also to exercise the right to take over management of the block or acquire the freehold (under the process of freehold enfranchisement) – despite the fact that the missing freeholder is unaware of the action.

The order will set out that funds be ‘vested’, or deposited, by the leaseholder for future compensation of the absent freeholder in the Court.

But there is a second stage to the process – an application to the First Tier Property Tribunal (previously known as the Leasehold Valuation Tribunal or LVT).

The judgement which is issued allows the leaseholder to buy the freeholder, and states that the funds paid should be “vested” in the Court. Effectively your vesting order means that the court takes over the responsibility of your freeholder and grant you a new and extended lease.

Will a Tribunal hearing be necessary?

Not always. Many cases involving an absentee freeholder are dealt with by the First Tier Property Tribunal without a full hearing. This is done by giving instructions to leaseholders or timescales for producing the required documentation such as copies of the lease, valuation documents, land transfer forms and the County Court Judgement.

The role of the First Tier Property Tribunal

With a vesting order granted by the County Court, the case is then transferred to First Tier Property Tribunal. It is the Tribunal’s job to calculate a ‘reasonable premium’ for the freehold.

The First Tier Property Tribunal can often perform its absentee freeholder work without the need of a full hearing by directing the leaseholder(s) to produce the necessary documentation within a defined timescale. The documentation will comprise:

• Copy leases

• The leaseholders valuation

• The County Court Judgement

• The proposed TP1 Land transfer form

As a method that allows leaseholders to avoid having an unmarketable property with a short lease, this system works well, allowing the leaseholder to acquire both the freehold or the grant of a lease extension (to themselves) at a very attractive premium – often an absolute bargain.that’s because, the tribunal will only have information from you the applicant. The freeholder, being absent, does not have the opportunity to argue for a higher premium for the lease extension.

You will then need to pay the amount set by the Tribunal as a reasonable premium into court. Those funds will be held by the Court and paid to the freeholder should they re-appear at some point in the future.

Will a Tribunal hearing be necessary?

Not always. Many cases involving an absentee freeholder are dealt with by the First Tier Property Tribunal without a full hearing. This is done by giving instructions to leaseholders or timescales for producing the required documentation such as copies of the lease, valuation documents, land transfer forms and the County Court Judgement

Do I need a solicitor?

it’s not essential – but a bit like conveyancing, very very few people have the knowledge ability or confidence to handle the process of an application to both the County Court and the Tribunal themselves. For a non-legally trained leaseholder, the complexities of the process can appear daunting and in practice can prove very tricky indeed.

Our advice is simple – don’t cut corners.

To ensure that the process runs smoothly and to have the peace of mind that the lease extension will be successfully obtained by mean of the Vesting Order, you really need to get help from solicitors who specialise in this area of the law. And our dedicated lease extension team deal with these kind of applications routinely – very few solicitors can say that.

Can I use a vesting order to informally extend my lease?

No – with a missing freeholder and a vesting order in place, you still need to use the formal statutory process to extend your lease.

Want a Lease Extension? Problems with an Absent Freeholder? Contact us today

Wherever you live in England and Wales, our expert Lease Extension Team can take the stress out of extending your lease despite an absent freeholder.

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