Absent freeholder problems

An absent freeholder can lead to all sorts of problems, from causing issues if you want to extend your lease or buy the freehold, to selling your property. But there are solutions. Read on if you have an absent freeholder or are considering buying a flat with an absentee landlord.

Rebecca Gamble Consumer Journalist

When you own a leasehold property, like a flat, you own the property for the length of your lease agreement with the freeholder and subject to the terms of the lease. While the freeholder of a property owns it outright, including the land it’s built on.

An “absent freeholder” is when a leaseholder is unable to locate their freeholder.

Given there is often a tension between leaseholders who own flats and the freeholder who has ultimate ownership of the property as a whole, you might think having a freeholder who is missing in action would be the perfect arrangement. Homeowners in this situation may be relieved to not have to pay ground rent and maintenance charges.

However, the reality is that an absent freeholder can cause all sorts of problems. If you have an absent freeholder you are likely to face practical and legal issues, including:

• If you want to extend your lease
• If you want to buy the freehold
• Maintaining shared areas
• When you buy the flat
• When you come to sell your flat

We look at some of these issues below. Given the importance of your lease not falling below 80 years, we look at how to extend your lease with an absent freeholder first.

Absent freeholder lease extension: How to do it

To start the formal lease extension process, you need to serve the freeholder with a Section 42 Notice – a technical document which needs to be served by a leasehold solicitor. But if you don’t know where the freeholder lives this won’t be possible. In this scenario, you need to make an application to the court for a vesting order, under the Leasehold Reform, Housing and Urban Development Act 1993.

However, the absent freeholder lease extension process can take a long time and it requires making an application to both County Court and the First Tier Tribunal. The legal fees can be expensive, and judges seem to be inconsistent about whether they allow the leaseholder to deduct their litigation costs from the price they pay for the lease extension. If they don’t, you must cover these costs yourself.

So before embarking on the absent freeholder lease extension process, take specialist legal advice. There are several other legal processes that may be appropriate in your case and could lead to a better outcome. One example is clubbing together with your neighbours and buying the freehold, read on for more on this – at the very least this will share some of the legal costs.

Leasehold reform promises improvements for leaseholders, such as making it easier and cheaper to extend a lease or buy the freehold. But noone knows when or even if these reforms will happen. Find out more in our guide on Leasehold reform.

Get FREE initial advice and a FREE ESTIMATE of how much your lease extension is likely to cost you from our lease experts

Step-by-step guide to extending your lease with an absent freeholder

If you want to extend the lease with an absent freeholder, here’s how to do it…

Step 1: Try to track down your freeholder

Before you go down the uncertain process of a court application, you should do you best to track your freeholder down and document your efforts so you can prove to the court you’ve made best endeavours to find them.
Your first port of call should always be the freehold title. This is a legal document containing the freeholder’s name and contact details, as well as other information regarding the freehold. You should have been given a copy when you bought your flat or you may be able to get it from the solicitor who acted on your behalf. If not, you can request a copy of the title document from Land Registry for £3.

If that doesn’t work, your leasehold solicitor will explain what’s required before you make a Court Application, but at the very least this will probably include:

• Serving the freeholder with a “Section 41” notice to their last known address(es) – which requires them to respond confirming details with 28 days
• Utilising a professional “People Finder” service 
• Placing an advert in the Times, the London Gazette and a paper local to your freeholder’s last address
• Checking Probate records 

Step 2: Make a Court Application

Most people use a solicitor to make a Court Application, but you can do it yourself. It’s likely that the court may want to schedule a hearing to discuss the case, which will require someone (usually a barrister) to attend to make the case.

Step 3: Make a Tribunal Application

Once the court has made their order, you will need to make an application to the First Tier Tribunal for them to decide how much you should pay. Usually, the process is that your representatives need to provide a draft lease and a lease extension valuation report. They need to ensure the paperwork is reasonable and the price is well evidenced. If they do, there is a good chance that the First Tier Tribunal judge will simply rubber stamp it. When choosing a lease extension valuer, you can either select one who is part of an end-to-end service like Homehold or choose a standalone valuer. 

Step 4: Complete and Register the Transaction

Your solicitor will pay a sum of money to the County Court, and they’ll sign your lease extension on behalf of your freeholder. Your solicitor can then register it at the Land Registry.

How long does it take to extend a lease with an absentee landlord?

This process can take 12-18 months to complete.

Buying the freehold from an absentee landlord

Just like with a lease extension, if you can’t serve the notice of the freeholder you’ll need to apply to the court to get a vesting order. The court must be satisfied that the tenants are qualifying tenants, the premises qualify and at least half of the qualifying tenants want to buy it. Read more in our Step by step guide to buying a freehold.

For further advice on buying the freehold, make a no obligation enquiry with our leasehold expert partners:

What happens if our absent freeholder turns up and claims ownership of the building?

If you’ve bought the freehold, the legal title will have passed to you and the freeholder is only entitled to the money already paid into court. With lease extension, the freeholder will be bound by extension and will only be entitled to be paid the premium held by the court.

What happens if you find out the freeholder has died?

If your freeholder has died, providing they had a valid will, the legal executors or administrators must inform the new freeholder of their asset so that they can assume responsibility. 

Absent freeholder problems

Another problem with an absent freeholder is that the value of a leasehold property can be seriously reduced if the communal areas of the property aren’t maintained. These communal areas are set out in the leasehold and freehold title.

There are millions of leasehold flats in England and Wales, and the terms of their leases vary dramatically.

For example, with a flat in a big purpose-built block it’s likely that the freeholder will have an obligation to manage common parts, maintain and insure the building and the estate it is on. A maisonette, on the other hand, often has a lighter touch relationship with the freeholder. In these cases, it’s not unusual for the leaseholders to maintain the property and organise insurance.

Particularly in the first example, having a freeholder go missing can make it hard to ensure the block doesn’t fall into disrepair. In all cases, if you need something from the freeholder – i.e., permission to make an alteration or help resolving an issue with other flat owners – it can be a nightmare to get.

However, these issues can be solved. You can usually work with your neighbours to take over control of the building either by collectively purchasing the freehold as explained above, or by exercising your Right to Manage. However, there are pros and cons to doing this so it’s a good idea to speak to a legal expert about this first.

Buying a property with absent freeholder

So what happens if you’re considering buying a leasehold property with absent freeholder? When you buy a property it’s your conveyancer’s job to protect you; they’ll want to satisfy themselves that the property is being adequately maintained and insured. 

They will also want to make sure that the seller is up to date with their ground rent and service charge account and has secured the freeholder’s permission for any alterations they have made to the flat.

Some of this information is provided from the freeholder through a LPE1 Form which forms part of the “Management Information Pack”. Without a freeholder, it won’t be possible to get this.

And your conveyancer should advise you of the challenges associated with owning a flat with an absent freeholder, including extending your lease and selling the flat in the future. See our guide to leasehold conveyancing for more advice.

At best an absent landlord is likely to delay the sale. At worst, your conveyancer will advise you not to proceed, or your lender will refuse to underwrite the loan – read on for more information. 

So think carefully before buying a flat with a missing freeholder; unless the issues are fully priced into the sale price or you have a plan to buy the freehold, it can be more trouble than it is worth. 

Absent freeholder insurance

If you’re buying a house with an absentee freeholder, your seller might offer to take out Absentee Landlord Indemnity insurance. This covers you against the risk of if the landlord or their successor reappears and makes a claim against you for unpaid obligations from your lease such as the ground rent.

And if you’re buying a property with an absent freeholder and you need a mortgage, many lenders will require you to get an Absent Landlord Indemnity Policy for them to consider lending to you.

However, not all lenders will lend, even if there’s a policy in place. The larger lenders are usually more comfortable, but the smaller building societies are usually less happy to lend when there is an absent freeholder. So it’s a good idea to get advice from a mortgage broker so you know your options. Bear in mind that even if your mortgage lender will lend now, it doesn’t mean that you won’t be refused when you come to remortgage in future or that a prospective buyer will be able to get a mortgage when you want to sell. This could leave you out of pocket.

Looking to buy a property with an absent freeholder? Speak to our mortgage experts, L&C to find the best lenders for you.

Selling a property with absent freeholder

Selling a leasehold property with an absent freeholder is more difficult: you may have fewer buyers interested in buying your property because of the issues it causes. And those that will consider buying are likely to ask for a discount to take into account the extra hassle and expense they may experience if they need to extend the lease. They’ll also take into account difficulties they may face when selling at a later date. So if you own a property with an absent freeholder, you may want to think about buying the freehold to the building. This solves two problems in one: you resolve the issue of the missing freeholder, and you can extend your lease at the same time.

With thanks to the lease extension valuation experts at Homehold for helping to produce this guide.

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