How can I deal with my absent freeholder?

by The Chartered Surveyor

Question

I live in a house which was converted into three flats during the 1980s. None of the leaseholders have had any contact with the freeholder for some time, and we are not even sure where he lives. This has caused a number of problems with maintaining the building, which we have had to organise between ourselves for a number of years. We are considering collective enfranchisement of the freehold to overcome the issue, but I understand that this is likely to be expensive as two of us are have leases with only 50 years left to run. What are my options to resolve the issue?

Answer

There appear to be two distinct, albeit interlinked, issues. Firstly, that of maintaining the building, and secondly that of the needing to extend the leases. The appropriate solution will depend, at least in part, on what funds you have available and are willing to direct to solve the problem.

In respect of the issue of maintenance you may be able to take control of the management of the building via a Right to Manage (RTM) order under the Commonhold and Leasehold Reform Act 2002 which can be granted by the First Tier Tribunal. In this case a RTM company formed by you and your fellow leaseholders would take responsibility for organising maintenance and repairs, either directly or via the appointment of a managing agent if you prefer. Alternatively, if you would prefer not to have any direct responsibility for management issues, an application to the Tribunal can be made for the appointment of a manager under Landlord and Tenant Act 1987.

However, neither of these approaches will solve the problem of your short and diminishing lease. Alternatively, therefore, you might wish to consider acquiring the freehold. The two available options are a claim for collective enfranchisement under the Leasehold Reform, Housing and Urban Development Act 1993 or an application for an acquisition order under Part III of the Landlord and Tenant Act 1987. In each case there is compensation payable to the freeholder (or into the court where the freeholder cannot be traced) and as such, neither is likely to be cheap. However, on acquiring the freehold you would be able to deal with both the issues of the unexpired lease terms and management. The valuation procedures under the 1993 Act and the 1987 Act are quite different, and you are likely to find that, with shorter unexpired lease terms, the premium payable under the 1987 Act is significantly less.

Both collective enfranchisement under the 1993 Act and RTM under the 2002 Act can be enacted as of ‘right’, whereas both solutions under the 1987 Act are only enforceable where the freeholder is in default of his obligations under the leases. As a first step, therefore, you will need sound specialist legal advice on the most appropriate solution given the specifics of your circumstances.