On occasion, a freeholder can become uncontactable or missing over time. For example, the freeholder might have moved abroad and lost interest in management or a deceased freeholder may have made no arrangements for a successor, leaving the building to fall into disrepair.
This raises immediate concerns such as whether the building is insured, as well as whether a service charge fund is safely held in an appropriate account. A longer term, but no less important issue is that of a leaseholder’s inability to sell or remortgage the flat, due to a short lease that needs to be extended.
Practical challenges of a missing freeholder
In the usual course of a statutory lease extension under the Leasehold Reform, Housing and Urban Development Act 1993 (the 1993 Act), a formal s.42 claim notice is served on the landlord. In addition, the extension of the lease term is granted by Deed signed by both the landlord and tenant.
Practical problems therefore arise in serving a notice on a party that cannot be found, negotiating a premium to extend the lease and then having the Deed signed at the end of the process.
Missing landlord procedure
Thankfully, the 1993 Act caters for these circumstances and whilst the procedure requires specialist advice and is more time consuming than a standard claim, it will be possible to extend the lease term on payment of a premium and reduce the ground rent to nil, even if establishing the whereabouts of the freeholder is not possible.
In the first instance steps must be taken to contact the freeholder at their last known address and at any other address that can be found by looking at public registries or historic documents. The solicitor involved will document this process carefully, to ensure that the efforts that have been made can be readily explained to a Judge, who will ultimately decide if the case can be considered a ‘missing landlord’ case.
The solicitor will prepare a County Court claim by compiling the evidence required to prove the case and will then guide the case as necessary through the County Court and First-tier Tribunal. Given that there will be no other party to respond to the claim, the Court will scrutinise such claims very carefully and forensic preparation is therefore key.
There are then established practices for setting the premium payable. This will be proposed by an independent valuer, as there will be no freeholder to negotiate with. The leaseholder will however be guided by their own valuation advice obtained at the outset.
Once a price is determined, further work needs to be undertaken to deal with the payment of the premium and other costs by the leaseholder, along and the subsequent signing of documents and registration at the Land Registry.
These cases bear little resemblance to standard lease extension claims however the outcome will be the same; a 90-year extension of the lease term on payment of a premium and costs, with the ground rent being reduced to nil.
Potential upside
Whilst it is noted above that this process concerning ‘missing landlords’ is more involved, and therefore more expensive than a standard lease extension in terms of professional costs. A solicitor with specialist knowledge in this area may be able to use this process to the advantage of the leaseholder. Advice should be sought on whether this will be possible in each case.
If you would like to speak to one of our team members, please do get in touch.
0800 84 94 101 or email: enquires@mayowynnebaxer.co.uk