Many people are put off buying a leasehold flat with a missing freeholder. But sometimes, an absent freeholder can mean picking up a real bargain. Why? Because it’s possible to both extend your lease and join with your fellow leaseholders in jointly purchasing the freehold – even if your freeholder is missing.
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How to extend a lease or buy your freehold when your freeholder is missing
The answer, which a surprising number of leaseholders, estate agents and solicitors alike are all unaware of, is the Vesting Order.
Click here to read more about Lease Enfranchisement and Lease Extension
Absent Freeholders and The Vesting Order Process
The process for either lease extension or freehold purchase when your freeholder is missing, initially involves an application to Court for what is known as a “vesting order”.
In acting for you, we will prepare the same notice of claim as we would if you were to be purchasing the freehold or applying for a leasehold extension from your landlord under the Leasehold Reform Act 1967. However instead of serving it upon them, we will send it to the County Court with our application.
The Court must be satisfied that we have conducted sufficient searches for your freeholder. If the judge is convinced that your freeholder really is “missing”, then they will make a Vesting Order. And this order means that you simply don’t need to serve the appropriate notice on your freeholder.
The County Court will then pass the matter to the First-Tier Property Tribunal who will determine the price (referred to as the premium) you should pay for the freehold (or lease extension) and the extent of the land to be transferred to you. These are is referred to as the “terms of acquisition”. Once they have done this, they will pass the matter back to the Court so that the Court may sign the transfer in the absence of the freeholder.
We will then need to pay the premium into Court. The court will hold that money – and if at any stage in the future the freeholder re-emerges, that money will be paid to them. Once the premium has been paid to the court, we can complete the process of buying the freehold (or lease extension).
Click here to read more about Vesting Orders and Missing Freeholders
What happens if the freeholder subsequently turns up and claims ownership of the building?
Nothing – if you have bought the freehold, then the legal title will by now have passed to you and the freeholder is only entitled to the money already paid into court. Similarly, with lease extension, the freeholder is bound by that lease extension and is only entitled to be paid the premium held by the court
How long is this process likely to take?
The whole process involving, as it does both the County Court and the First-Tier Property Tribunal is not quick. It can take between 12-18 months.
How much is this likely to cost?
The biggest expense is likely to be the premium you need to pay into court to buy the freehold. Every building varies – the statutory calculation depends on a number of factors including the value of each individual flat, the level of ground rent payable both now and in the future and the length of the remaining lease.
You will need to appoint a specialist surveyor to value the premium. Here at Bonallack & Bishop we have developed an informal panel of surveyors who specialise in this area. We more than happy to put you in touch with one in your local area – and if you wish, to instruct him or her on your behalf.
Click here to read more about specialist enfranchisement or lease extension surveyors.
However, in addition to the premium, you will also have to pay your own legal and valuation fees, plus court fees.
The good news is that unlike buying your freehold through the process of enfranchisement, you don’t have to pay the reasonable legal and surveying costs of your freeholder – because that freeholder is not involved in the proceedings.
What’s more, because the First-Tier Property Tribunal, in assessing the right premium, will only hear from your valuer, we would normally expect the premium set by the tribunal to be on the low side. Sometimes this means that you can then buy your freehold for what is frankly a bargain price.
Click here to find more about how the First-Tier Property Tribunal works.