Even where a freeholder cannot be located, leaseholders may still be able to acquire a share of the freehold or obtain a statutory lease extension without the freeholder’s participation. This can be achieved by applying to the court for a vesting order under the Leasehold Reform, Housing and Urban Development Act 1993.
Acquiring a Share of the Freehold
To obtain a vesting order for collective enfranchisement, the court must be satisfied that:
- The tenants are qualifying tenants;
- The premises qualify; and
- At least two-thirds of the qualifying tenants participate in the claim.
The court must also be satisfied that the tenants would otherwise be entitled to serve an Initial Notice on the landlord and that all reasonable steps have been taken to locate the absent landlord. This will typically involve making extensive enquiries to trace the landlord, including investigative searches and advertising in an appropriate local publication.
If the application is successful, the court may dispense with the requirement to serve the Initial Notice on the landlord. The premium payable and the terms of the transfer will then be determined by the First-tier Tribunal (Property Chamber) (the Tribunal).
The Tribunal will consider the valuation evidence submitted on behalf of the participating tenants and determine the premium and terms by assessing the position that a reasonable landlord would likely have adopted had they participated in the proceedings.
Once the premium and terms have been determined, the court can make the vesting order. The participating tenants will then be required to pay the premium into court, and the transfer will be completed by a person appointed by the court.
Claiming a Lease Extension
To obtain a vesting order for a lease extension, the court must be satisfied that the tenant is a qualifying tenant.
The procedure is broadly the same as that for collective enfranchisement, including the requirement to demonstrate that reasonable efforts have been made to locate the absent landlord.
Costs Involved
We have successfully acted for tenants in applications to recover legal costs and disbursements incurred in pursuing claims of this nature. However, any recovery of costs is subject to the court’s discretion and cannot be guaranteed.
Timing
Claims involving an absent freeholder are typically more complex than standard lease extension or enfranchisement matters and can take up to 12 months, and sometimes longer, to conclude.
Advantages of Acquiring a Share of the Freehold and Extending the Lease
Where a freeholder is absent, leaseholders may encounter difficulties when selling their property, particularly where the lease has fewer than 80 years remaining. Issues can also arise where the building has fallen into disrepair because there is no landlord carrying out the maintenance and repair obligations contained in the lease.
One of the principal advantages of acquiring a share of the freehold is that the participating leaseholders gain greater control over the management and upkeep of the building. As co-freeholders, they can make decisions regarding the management of the building and ensure that necessary works are carried out.
In addition, leaseholders who acquire a share of the freehold are often able to grant themselves new long leases, typically for a term of 999 years at a peppercorn or nil ground rent giving them greater security and control over their property interests.
Need Advice?
If you are unable to locate your freeholder, our leasehold solicitors can advise on the options available to you and guide you through the process of obtaining a lease extension or acquiring a share of the freehold.
Please get in touch with Rebecca Rinn at rrinn@streathers.co.uk to discuss your circumstances.
