
As the owner of a leasehold flat it may seem the ideal situation if your freeholder has disappeared – you get to enjoy the property without the interference or unreasonable demands of the landlord and there is nobody to whom you can pay the ground rent or the, often more significant, service charge. However, when you come to try to sell your property, the absence of a traceable freeholder can cause very significant issues – particularly with mortgage lenders.
When you have a leasehold interest in property (even the usual long leases which are typical of residential leasehold property) there are some responsibilities that remain with the landlord or freeholder under the lease. These responsibilities typically include enforcing the obligations of all of the leaseholders occupying the property as set out in the leases, arranging the buildings insurance, the maintenance of any communal areas in the property or grounds and generally ensuring the smooth running of the property.
When the landlord cannot be traced or has disappeared completely these obligations cannot be enforced. Often, as a practical measure, the leaseholders within the property jointly take over these responsibilities by maintaining the building themselves and keeping the insurance payments up to date. This often works well when all of the leaseholders stay put but problems are around the corner if one of the leaseholders wishes to sell his or her property.
Many mortgage lenders refuse to lend on leasehold properties where there is an absentee freeholder. This makes it extremely difficult for a potential seller to market and successfully sell their leasehold flat. In the past a mortgage lender might have been persuaded to advance funds if there was absentee freeholder/landlord indemnity insurance in place but, more often than not, particularly in the current market where lenders are taking a hugely more cautious approach than in the recent past, a refusal is the more likely outcome.
Understandably, mortgage lenders (who as a last resort are reliant upon selling your property to recoup the funds they have advanced) like easily marketable properties that will, if required, sell quickly. The marketability of a leasehold property with an absentee freeholder or landlord is a big problem for lenders for the following reasons:
- with no landlord in place there is no one to enforce the obligations within the lease on the other leaseholders – a problem leaseholder will be left unchecked;
- there is no guarantee that the property will be maintained, and therefore there is certainly no guarantee that, when the property is sold on again, it will still maintain its value.
These issues can affect the marketability of a property and, in the current climate for mortgage lending, they pose a significant and increasing hurdle to selling a property to a buyer who requires a mortgage. There is of course the possibility of selling your property to a cash buyer but buyers of this kind are few and far between and they will expect a, potentially significant, adjustment to the price to reflect the limited marketability of the property in the absence of a traceable freeholder.
It may be possible for you to purchase the freehold from the absentee landlord. This is not an easy process and requires a number of steps, which should be taken with the advice of a good solicitor who has experience in this area. The steps required include trying to track down the freeholder and sending a formal notice asking him to confirm his correct address details. This may prove impossible but you will need to able to show that you have done what was reasonable. You will also have to ensure that all other leaseholders within the property are in agreement with the decision. This may prove a problem too, especially if some leaseholders have no intention of selling and are happy not to have a freeholder around to bother them.
However, if the other leaseholders are in agreement, the leaseholder applying for the freehold can then put in an application to the land registry for a copy of the freehold title and approach the court to decide the value of the freehold. It is only at this point that the leaseholder will know if it is financially viable or not to purchase the freehold. If he decides that it is, then payment is made to the court (on behalf of the freeholder) and the freehold title will then be transferred to the leaseholder who will take on the responsibility of freeholder.
This is clearly a complicated process and one for which good legal advice and determination is required. If you are in a position where you cannot trace your freeholder you would be well advised to contact a solicitor to try to sort out the situation sooner rather than later. Delaying matters will probably cause you significant problems should you decide you wish to sell your property at some time in the future.