What happens when you own a long lease of a flat but the landlord is “missing”? How can you buy the freehold or extend your lease or take over the management obligations legally? This article briefly sets out what the options are.
Landlords may be “missing” or uncontactable for a number of reasons. They may not realise or have forgotten they own an interest in the building, they may have emigrated, died or been declared insolvent or they may simply have decided to ignore the obligations they have. If the landlord is a limited company they may have been struck off the register by Companies House.
It is important to establish, early on, if the landlord is truly “missing”. In some of the examples above, the landlord is not truly “missing” for the purposes of the legislation to which this article will refer. If the landlord has died, further searches at the Probate Registry will be required. If the landlord has been declared bankrupt or been struck off the register at Companies House, contact will need to be made with the Treasury Solicitor. In any event it will be important to be able to show to the Court that efforts have been made to locate the landlord. This can be undertaken by employing a professional tracing agent and placing adverts in newspapers/publications local to the building and the landlord last known address if there is one.
Legislation dealing with “missing” landlords exists to protect leaseholders’ rights under the provisions of the Leasehold Reform Housing and Urban Development Act 1993 (“the 1993 Act”) , the Landlord and Tenant Act 1987 (“the 1987 Act”) or the Commonhold and Leasehold Reform Act 2002 (“the 2002 Act”). A leaseholder cannot properly serve a claim notice under these provisions if the landlord is not identifiable or his whereabouts in unknown. Landlords do have a duty to provide their name and address for service by the provisions of section 48 of the Landlord and Tenant Act 1987, however some landlords do not comply. The Land Registry will usually hold an address for a landlord on their title but these addresses are often not kept up to date. Leaseholders also have the right to request confirmation of the landlords name and address from anyone to whom they pay rent. A failure to comply with that request is an offence. This does not, of course, assist where no rent or service charges are being demanded.
If the landlord is truly “missing” there are several options for leaseholders to consider. Some options will require the support of a majority of other leaseholders in the building. Some deal with the problem of a short lease, others deal with lack of management and some options solve both problems.
The 1993 Act gives qualifying long leaseholders a statutory right to extend their lease by 90 years at a peppercorn ground rent. The process is begun by the service of a claim notice. If the landlord is missing this becomes problematic. The 1993 Act itself provides a solution to this. The leaseholder can apply to the court for a vesting order. The court has the power to grant an order which vests a new lease in the leaseholder which overcomes the problem of having to serve a claim notice on the landlord. The premium is then decided by the First Tier Tribunal (Property Chamber) (“The FTT”).
The 1993 Act gives a majority of qualifying long leaseholders the right to acquire the freehold (and any intermediate leases) of their building. This process is also begun by serving a claim notice on the landlord, which is problematic if the landlord is missing. Again, the court has the power to make a vesting order which will vest the freehold title in a purchaser nominated by the leaseholders for this purpose (the nominee purchaser). The premium is decided by the FTT.
The 1987 Act is a little known gem. It gives a majority of qualifying leaseholders the right to acquire the freehold of their building, on certain grounds which are all generally fault based. For example, if the landlord is in breach of their obligations relating to the repair or maintenance of the building. If the landlord is “missing” they are normally going to be in breach of these obligations. The court has the power to make a compulsory acquisition order which can be followed by a vesting order. Whilst fault must be proved on the part of the landlord, the benefit of using the 1987 Act instead of the 1993 Act is the premium payable for the freehold is generally less. The premium payable under the 1987 Act is a market premium which is determined by a surveyor appointed by the President of the Upper Tribunal (Lands Chamber). This is an extremely useful piece of legislation particularly if the leases have less than 80 years left to run, and may save leaseholders a considerable sum of money.
Appointment of a Manager by the Tribunal
The 1987 Act also gives any one qualifying leaseholder the right to apply to the FTT to have a manager appointed. This is a useful tool if an acquisition of the freehold is unaffordable or a majority of leaseholders cannot be formed. Fault must be proved on the part of the landlord, which is usually fairly easy to do if the landlord is “missing”. The Tribunal has the power to appoint a manager who is usually nominated by the leaseholder making the application, to take over the management obligations in the leases. The manager will owe its duties to the Tribunal and will not take instructions from the leaseholders. This option can be ideal if there is a dispute amongst leaseholders in the building. The other benefit of this option generally, is that after a 2 year appointment, the leaseholders can apply for the freehold under the provisions of the 1987 Act as above.
Right to Manage
The 2002 Act gives a majority of qualifying long leaseholders the right to acquire the management obligations relating to their building without having to prove fault on the part of the landlord. The process includes an obligation to serve a claim notice on the landlord which is not possible if the landlord is missing. The 2002 Act provides a mechanism for the leaseholders to make an application to the FTT for an order that their RTM company is entitled to acquire the management. This can be done even where the landlord is missing.
Please note that this note is an extremely simplified summary of the relevant legislation and is not intended to amount to legal advice.
The award winning Leasehold Enfranchisement team at Hart Brown have the experience and specialist knowledge to assist leaseholders who find themselves in such a situation.
Partner and Head of Leasehold Enfranchisement
Hart Brown Solicitors