What to do if the freeholder is absent

An absent freeholder is the term used when the leaseholder of a property (typically a flat) is unable to locate the owner of the freehold interest, the freeholder.

The problem usually arises in houses that have been converted into flats. As part of that process the flats are sold off on very long leases and the freehold, a separate legal interest) is retained by the property developing seller but has very little financial or other value. This is because the real value is in the long leases, which can be extended meaning that the property will never revert (go back) in practical terms, to the freeholder.

Often, the remaining freeholder has little or no interest in the property, having drawn out the value on selling the flats and he/she/they may even forget they still have a role to play as freeholder.

When using the term “absent”, this can also cover a situation where you can still locate the freeholder but he/she/they simply do not respond to communications.

There are several ways in which a freeholder might become absent in the strict sense of the word, which are :

• Freeholder has died -  the difficulty can arise because beneficiaries are unknown or uncontactable and locating anyone who may legally be the freeholder becomes difficult.

• Freeholder has moved address – this can include potentially moving abroad and where it is impossible to find a way of contacting the freeholder.

• Corporate Freeholder - sometimes, a company owns the freehold, and it may dissolve or become inactive, leaving unclear ownership.

Legal Problems where freeholder is missing or uncontactable

An absent freeholder can cause several legal problems for leaseholders, including:

Lease Extensions – to agree a lease extension (before the lease runs down to 80 years requires agreement with the freeholder. Often lease extensions are triggered when a flat owner wants to sell and where the freeholder is absent this can create significant problems, costs and delays because court action will be needed (see below)

Freeholder obligations in the lease – typically, the freeholder, under the terms if the lease will be responsible for key actions such as arranging buildings insurance and ensuring that the building structure and any common parts are kept in repair, albeit that the leaseholders will pay for this under service charges. Where the freeholder disappears and does not fulfil these functions real problems can ensue for the leaseholders and mortgage lenders.

What can you do if the freeholder is absent?

Options to consider when dealing with an absent freeholder :-

• Track Down the Freeholder - tracing services can be employed to locate the freeholder or their potential beneficiaries.

• Appoint a Manager - leaseholders can collectively appoint a managing agent to handle maintenance issues and collect service charges, essentially taking on some of the freeholder's responsibilities.

• Collective Enfranchisement - under certain circumstances, leaseholders can combine and purchase the freehold collectively, taking ownership of the entire building. This can be a complex process with legal and financial considerations.

• Absent Freeholder Indemnity Insurance - covers potential losses incurred due to the freeholder's absence, such as unpaid ground rent or difficulties enforcing lease terms. While it doesn't solve underlying problems, it can mitigate some risks.

Applying to court  for a vesting order

The Leasehold Reform, Housing and Urban Development Act 1993 empowers you to apply for a vesting order through the court. A vesting order acts as a court order that grants you the ability to purchase the freehold or extend your lease, even without the freeholder's involvement or consent.

To apply for a vesting order for a share of the freehold, the court considers 3 factors :-

• Qualifying Tenants - this applies to leaseholders with sufficient qualifying lease terms. This typically refers to leases granted for a fixed term of at least 21 years (originally at least 21 years).

• Eligible Premises - the property must meet specific criteria outlined in the Act. Not usually a problem for residential flats.

• Two-Thirds Majority - at least two-thirds of qualifying tenants in the building must participate in the claim.

The court will determine the fair market value of the freehold interest or lease extension and may order the leaseholders to pay this amount into court as compensation for the absent freeholder.

Before applying for a court order you will need to demonstrate you have made reasonable efforts to find the freeholder, which means :-

• Public Notices - place at least 2 advertisements in local newspapers most likely to be seen by the freeholder.

• Professional Search - consider hiring a tracing agent specializing in locating missing individuals.

• Direct Contact - visit the freeholder's last known address and inquire with neighbours if they have forwarding information.

• Probate Records - check if the freeholder has passed away, which may help identify beneficiaries who might hold the freehold title.

Keep copies of placed advertisements and record your visit to the last known address.

Court Orders for Urgent Repairs or Major Works

If the absent freeholder's neglect leads to urgent repairs or major works being necessary to maintain the property's safety and structure, you might need to apply to court for an order.

The court can grant orders including permitting :-

• Emergency Repairs - authorising essential repairs to be carried out and potentially recouping the costs from future service charges or by placing a charge on the property.

• Major Works Orders - allowing essential building works to proceed, even if the freeholder's consent cannot be obtained.

How we can help

We have 1 of the UK's largest and fastest growing specialist property law teams. We have dealt with many situations where there is a missing, uncontactable or absent freeholder. Whether applying to court or resolving the situation in another way, you can be assured we offer proactive, experienced and cost effective advice. Please do get in contact.