What to do if you have an Absentee Freeholder
The Leasehold and Freehold Reform Act 2024 was passed on the 24th May 2024, but is not yet in effect and the date for this is not yet clear. We will update our content as and when the finalised legislation is published. Read more - Expected changes
What is an absentee freeholder?
An absent freehold is a term used when the party owning the leasehold of a property is unable to get in touch with their freeholder. Having a missing landlord for some leaseholders may not seem like an issue because:
- there are no ground rent demands; and
- you can maintain the communal areas yourself, which means no exorbitant service charges.
The reality, though, is that you will be faced with a problem further down the line if there is an absentee freeholder.
Absent freeholder problems
- Extending your lease
- Buying the freehold
- Freeholder not maintaining property
- Selling a property with absent freeholder
- 1
How do I extend my lease with an absent freeholder?
To start the Formal Lease Extension Process you need to serve the freeholder with a Section 42 Notice, however you can't do this when you don't know where the freeholder lives. Where you can't serve the notice of the freeholder, you need to apply to the court to get a vesting order.
Read more - How to extend your lease when you have an absent freeholder
"...(vi)Where a trustee jointly or solely entitled to or possessed of any interest in land, or entitled to a contingent right therein, has been required, by or on behalf of a person entitled to require a conveyance of the land or interest or a release of the right, to convey the land or interest or to release the right, and has wilfully refused or neglected to convey the land or interest or release the right for twenty-eight days after the date of the requirement"
"...the court may make an order (in this Act called a vesting order) vesting the land or interest therein in any such person in any such manner and for any such estate or interest as the court may direct, or releasing or disposing of the contingent right to such person as the court may direct"
- 2
Can you buy freehold from an absent freeholder?
What you need to do will depend on whether the freeholder is a limited company or an individual. If the freeholder is a company, it very simply exists - if it is registered with companies house - or it does not. If an individual is absent, you must first prove their absence.
Once the necessary steps have been taken to prove the landlord's absence, to purchase the freehold, 50% or more of the leaseholders need to serve a Section 13 Notice on the freeholder. As with a lease extension where you can't serve the notice of the freeholder, you need to apply to the court to get a vesting order.
Read more - How to purchase your freehold when you have an absent freeholder
- 3
Freeholder not maintaining property
The value of a leasehold can be vastly affected if the communal areas of the property aren't maintained. Communal areas are set out within the leasehold and freehold title.
Right to Manage
With cases of freeholder not maintaining property, the leaseholders can take over the management of the building by setting up a Right to Manage Company. This will give them full responsibility for enforcing covenants, setting up reserve funds and maintaining the communal areas or they can appoint a managing agent to handle these responsibilities.
Buying the freehold
As mentioned above, you will need to prove that you tried to contact the freeholder and that they have abandoned the property. Once this is done, you can start the process of buying the freehold.
- 4
Selling a property with absent freeholder
Where there is an absentee freeholder, a leaseholder will have problems selling the lease. Sometimes, your buyer's mortgage lender will not proceed, even where the buyer has obtained the proper absent landlord indemnity policy.
Where a leaseholder has taken the view that they own the flat due to a long-term absent freeholder, they typically make internal alterations which breach the terms of their lease. The buyer's solicitors are likely to take issue with this. Normally, a deed of variation on the lease would cover these breaches legally. However, where the freeholder is absent, a deed of variation cannot be obtained. In these cases, the entire transaction is likely to fall through.
Getting absent landlord indemnity policy won't always solve your problems, as policies aren't always acceptable, and when you eventually come to sell, your new buyers will have to go through it all again, likely costing you sales or affecting your price.
Where there is a relatively short lease, you'll want to extend it when buying. As you can see from section 1 above, this is unlikely to be possible within the timeframe of your leasehold purchase.
How do you prove a freeholder is absent?
Failing to make all reasonable attempts to find the freeholder could lead to your application to court being rejected. To avoid this, you should:- Place 2 adverts in the local newspaper;
- Hire a search agent to find the freeholder;
- Physically attend the last known address of the freeholder; and
- Check the probate records.
The Leasehold Reform Act 1993 | Section 50 states: "Before making any such order the court may require the tenant to take such further steps by way of advertisement or otherwise as the court thinks proper for the purpose of tracing the person in question."
What is the Absent Landlord policy?
When buying with a mortgage, if you have an absent freeholder the mortgage lender will require you to get an Absent Landlord indemnity Policy. A freeholder is absent for this policy if they are missing, unresponsive or insolvent and you are unable to obtain clear ground rent receipts at the date of purchase.
What the insurance covers you for is the risk for if the landlord or its successor reappears and makes a claim against you for unpaid obligations from your lease such as the ground rent.
Free initial leasehold advice
Arrange a free consultation with one of our experienced conveyancing executives on:
- Lease extension.
- Purchasing the leasehold, freehold or share of freehold.
- Selling a leasehold property with a short lease.
- Extending the lease at the same time as you sell.
We specialise in lease extensions and have RICS valuers for the premium/negotiation and solicitors for the section 42 notice and formal or informal extension. Request a tailored quote for:
- RICS Lease Extension Valuation or L2 Homebuyers Survey.
- Serving of the section 42 notice or section 13 notice on the freeholder.
- Negotiation with the freeholder (with the support of your RICS valuer).
- Completion of the legal work, including deed of variation.
- Application to Tribunal to determine the premium.
- Vesting order for absent landlords.
Caragh is an excellent writer and copy editor of books, news articles and editorials. She has written extensively for SAM for a variety of conveyancing, survey, property law and mortgage-related articles.
