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Following a thread regarding buying the freehold from the Crown, I am reproducing below an article that I wrote that appeared in a publication called News on the Block in August 2010 about absentee/missing freeholders:
Missing freeholders are problematic when lessees want to buy their freehold or extend their lease. In each of the following cases, as a prerequisite the Court will need to be satisfied that reasonable efforts to trace the freeholder have been made such as engaging the services of an Enquiry Agent or checking the Land Registry for last known address.
Buying the Freehold
There are two options:
An application under Section 27 the Leasehold Reform, Housing and Urban Development Act 1993
Lessees apply to the County Court for a Vesting Order.
A successful application results in the freehold vesting in a property company or the individual lessees’ names. An application is then made to the Leasehold Valuation Tribunal (“LVT”) to determine the price payable. Once determined, the Court issues a Judgment that the freehold may be acquired by the leaseholders. The price (less costs as approved by the Court) must be paid into Court before the vesting order can be registered at the Land Registry.
The procedure can be lengthy and expensive.
An application under Section 33 of the Landlord and Tenant Act 1987
A quicker and cheaper alternative allows lessees to acquire their freehold where the freeholder is in breach of any covenant relating to repair, maintenance or management. The absence of a freeholder will commonly give rise to a breach of the freeholder’s covenant to insure.
An application is made to the County Court.
The price payable for the freehold is such amount as an appointed surveyor certifies. No LVT application is needed. It is for the District Judge to approve. Again, the price (less costs as approved by the Court) must be paid into Court before the vesting order can be registered.
If the freeholder was a UK company which has been struck off or ceased to trade, the freehold vests in the Crown under Bona Vacantia rules. The Treasury Solicitor on behalf of the Crown will usually sell the freehold to the leaseholders at a price which is often less than market value plus his usually modest costs.
Acquiring a Lease Extension
The lessee can apply to the County Court under section 50 of the 1993 Act for a Vesting Order.
A Vesting Order provides for the surrender of the existing lease and the grant of a new lease. Then, the LVT determines the terms of the lease extension, approves the form of lease and fixes the premium payable.
The appropriate sum is paid into Court and the lease is signed by the District Judge. Although a long lease will have been acquired the freeholder is still missing with all that entails, so the preferable route is always to acquire the freehold if possible.
If your freeholder is missing, seek specialist legal advice to help you through the complex procedure for buying the freehold or acquiring a lease extension.
Vanessa Warwick Landlord and Co-Founder of PropertyTribes.com **If you have got value from Property Tribes, find out how you can support it in remaining a free to use community resource**
If you buy a flat and the freeholder cannot be found and you want to sell, apart from the problem surrounding you cannot prove the property is insured thereby lenders not lending to the buyer (which you can get around with indemnity insurance) are there any other reasons why the freeholder must be present/contacted in the conveyancing procedure, i.e. do they need to be contacted?
Next time I need to buy the freehold of a block of flats (freehold vesting with Bona Vacantia) to uplift the value of my leasehold and make the flat mortgageable I will certainly be instructing you. My own experience is that normal Solicitors/Conveyancers appear to have learned the theory but do so few of these they are very inneficient in dealing with the processes. It's great to have your experience on the forum.
Thanks for all the replies. Always happy to share my knowledge.
Mark - thanks for your comments. I find that many clients have a particular preferred conveyancer that they instruct but very few of them have the knowledge of short leases/missing freeholders that can benefit the client. In my firm, we work with our conveyancing team to assist our clients in short lease purchases or missing freeholders. One recent example was assisting a client in a contract race by organising a section 42 notice to be drafted, signed and served that same day. The client was delighted and the seller's solicitor was left shocked that we could turn it round so quickly. Knowledge is power (or so they say)!
John - thanks for the reply to this thread. This is a very interesting situation and one that I would be happy to consider for you. Without the full address of the property and a little more background, I am unable to obtain titles from the Land Registry and provide you with some preliminary thoughts. I am back in the office tomorrow so please feel free to email me. I can then post my findings in generic terms on this thread so that everyone can see the outcome.
Always happy to contribute - hope everyone has had a good weekend.
Thanks Katie. I am happy to put my endorsement too- we have "outsourced" our enfranchisement work to Katie's firm historically and found her incredibly good (you could probably charge more to be honest Katie )
Shhhhhhhhhhhhhh!!!Julian Sampson said:
Thanks Katie. I am happy to put my endorsement too- we have "outsourced" our enfranchisement work to Katie's firm historically and found her incredibly good (you could probably charge more to be honest Katie ) Julian
I do like an article that is easy for non-experts to understand.
Just one other advantage to point out by going down the 1987 Act route (to acquire the freehold); there is no "Marriage Value" to pay when the leases have less than 80 years remaining. With the 1993 Act, Marrriage Value is taken into consideration and adds to the total cost.
Essentially, Marriage Value is a valuation principle that can effectively add a few thousand pounds to any freehold purchase (or lease extension come to that) simply because the lease term has dropped below 80 years.
Tom Merralls - TJM Law
I host the London Real Estate Meet on the 2nd Tuesday of every month. 11 years and running. If you have never been before, email me for the 'new visitor' link.
Also happy to chat on the phone. Pay It Forward; my way of giving back through sharing. Click on the link: PropertyFortress.com/Ask-John to book a time. I will call you at the time you selected. Nothing to buy. Just be prepared with your questions so we can use the 20 minutes wisely.