Absent freeholders or landlords
When a landlord is absent, the leaseholders might think “happy days” with benefits such as quiet enjoyment of the property without the interference of the landlord or the lack of expensive service charges.
However, when it comes time to sell the leasehold property, leaseholders will realise that, the absentee freeholder situation poses a host of problems where mortgage lenders are concerned.
The freeholder or landlord of the building has a set of responsibilities to both the property in question and the leaseholders residing within the building. These responsibilities include the upkeep and maintenance of the communal areas and grounds and more broadly ensuring the smooth running of the property.
When the landlord cannot be located, or has “run off”, these responsibilities are then left unchecked. In many cases the leaseholders within the property will join forces and take over those responsibilities by maintaining the building themselves and keeping the insurance payments up to date.
Many mortgage lenders simply aren’t willing to lend on leasehold properties where there is an absentee freeholder, so making it incredibly difficult for the leaseholder to market their property. On occasion the lender may be swayed to lend if there is an absentee freeholder/landlord indemnity insurance in place but, more often than not, a mortgage refusal is something which the leaseholder should come to expect.
At one time, lenders wouldn’t have thought twice abut lending on a property with an absentee landlord, especially where indemnity insurance was in place and the leaseholders appeared to be working together to maintain the property to a good standard. However, the shift in the climate since the last financial crisis has seen a more cautious approach by mortgage companies.
Mortgage lenders only want to lend on properties they can easily sell if the owner does not keep up their mortgage repayments. The marketability of a leasehold property with an absentee freeholder or landlord is a big problem for lenders for a number of reasons:
Firstly, there is no one to enforce the obligations within the lease on the other tenants; there is no guarantee that the property will be looked after and there is certainly no guarantee that, when the property is sold on again, its value will be maintained. These factors make it a high risk move which lenders aren’t willing to take in the current climate, and there appears little prospect in this changing.
It may well be possible for the leaseholder to purchase the freehold from the absentee landlord but this doesn’t always prove to be an easy task. The leaseholder will first have to apply for a vesting order. The leaseholder will need to try and track down the freeholder and send a formal notice asking him to confirm his correct address details. In many cases this may not be possible but it is a step which must be shown to have been taken.
The leaseholder applying for the freehold title will also need to ensure that all other leaseholders within the property agree with the decision. This may prove a problem too, especially if some of the tenants have been more than happy with there being no active landlord.
However, if the other leaseholders are in agreement the leaseholder applying for the freehold can then put in an application to the Land Registry for a copy of the freehold title. It will then be down to the court to decide the value of the freehold and the leaseholder will need to calculate whether this is actually financially viable.
If successful the title will then be transferred to the leaseholder who will then take on the responsibility of freeholder.
If you have concerns about how an absent landlord or freeholder might affect your property sale then pleases contact Mark Wright (email@example.com) . Mark is a specialist property solicitor at John Hodge Solicitors based in North Somerset.