Absent Freeholders – how Vesting Orders can help
The Leasehold Reform (Housing and Urban Development) Act 1993 is designed in part to help leaseholders with the process of either buying their freehold or extending their lease when their freeholder is absent. And its answer is the Vesting Order
The legislation has huge advantages for the leaseholder because where a property is known to have a freeholder who cannot be tracked down and where the lease is getting shorter and shorter, a property starts to become increasingly hard to sell – and increasingly unattractive to lenders to grant a mortgage to the current owner or prospective purchaser.
And that situation becomes worse if the lease or leases in question are already relatively short – because they’re only going to get shorter and less attractive to most lenders and purchasers alike.
Looking for Help with a Lease Extension or Freehold Purchase from an Absent Freeholder? Call our Specialist Leasehold Team on FREEPHONE 0800 1404544 for FREE Initial Phone Advice.
Vesting Orders and Absent Freeholders
So if your freeholder is missing and you’re looking either to extend your lease or buy your freehold together with some of your fellow leaseholders, what can you do?
The answer is for the leaseholder to apply for a Vesting Order at the County Court. As part of the Vesting Order process the County Court has the power to waive the requirement for serving notice on the freeholder completely.
When it comes to an absentee landlord, the process for a leaseholder who wants a leasehold extension or for a group of leaseholders who want to purchase the freehold for their block of flats, or just get the legal right to manage it, is as follows:
1. Produce the evidence to show that you have made an effort to get in touch with the absent freeholder. The evidence submitted to the Court must include :
• Copies of Office Copies from the Land Registry. These prove to the court who owns the property’s freehold and will also show their last known address.
• Proof that the freeholder no longer lives at the address held on record for them, or has sold that property to someone else.
• Statements showing that a visit has been made to the last known address of the freeholder – and there was no forwarding address
In providing enough proof to the court of your efforts to trace your absentee freeholder, it may be a good idea to appoint a private investigator to try to track the missing person or company down, and to consider advertising in the local paper. Our experienced leasehold team can help you organise the collection of this kind of evidence.
2. Provided that the County Court is satisfied that the leaseholders have exhausted all avenues for tracing the freeholder, the Judge will normally make a ruling based on the written evidence which you have provided. However if there is some uncertainty involved, the court can set a date for a Vesting Order hearing.
Does the Vesting Order have any other uses?
It certainly does. If you know where your freeholder is and you have correctly served the relevant documentation on them, what happens if they simply don’t cooperate?
That’s simple. We can warn them that if they don’t cooperate (e.g. if they fail to respond to our Notice of Claim on time) we will apply for a Vesting Order.
This is a powerful warning and more often than not a simple threat of a Vesting Order will persuade the awkward freeholder to cooperate. The alternative for them is that they are effectively excluded from the process and the lease extension or freehold purchase application continues without them – which is almost certainly something that is not in their interests and which they will want to avoid at all costs.
What effect does a Vesting Order have?
This judgement will state that any individual lease can be extended or the freehold acquired by the leaseholder(s), and also that the premium payment from the leaseholders to do so should be “vested” in the Court.
The premium payable for the extension or purchase will be determined by the First Tier Property Tribunal.
Once the premium has been set by the tribunal, appropriate Funds are paid to the court. They remain vested there, held on account, for payment to the freeholder should they reappear in the future.
Bonallack & Bishop will subsequently deal with completing and registering the matter with the Land Registry for you.
And to sum up, with a vesting order in place and the premium paid into court, there is nothing that any freeholder can do to overturn the lease extension or freehold purchase, should they reappear and object at some future date.
The Role of the First Tier Property Tribunal
With a vesting order in place, the case will then be transferred to the First Tier Property Tribunal (previously known as the Leasehold Valuation Tribunal).
This Tribunal will assess what it considers to be a reasonable premium for either the lease extension or freehold purchase, as appropriate.
The Tribunal will often assess what it thinks to be a reasonable premium without the need for a full hearing, based on written evidence.
The documentation required by the court would normally include the following:
• Copies of the lease (or leases if you are buying your freehold)
• The valuation of the lease extension or freehold purchase premium as prepared by the leaseholder’s own specialist valuer
• The Vesting Order judgement from the County Court
• The proposed TP1 form for the formal legal transfer of the land.
Absent freeholders – the need for specialist legal advice
This legislation works very well by allowing leaseholders to avoid the situation of being stuck with a property they cannot sell because it has such a short lease.
It also allows the leaseholder to get both the right to buy the freehold and then subsequently grant themselves a lease extension at a good value price.
However, for a leaseholder who has not worked in the legal world before, going through this process and following the letter of the law is not only tricky, but daunting too.
There is some very simple advice to follow in all of this. Don’t be tempted to cut corners.
The best way of making sure that the process of going through the leasehold extension or freehold purchase and getting the Vesting Order granted is to work with solicitors with plenty of in-depth experience and knowledge of this area of property law.
Our five strong leasehold team do nothing but lease extension, collective enfranchisement and right to manage cases – and have plenty of experience of using Vesting Orders to extend leases and buy freeholds.
Vesting Orders – cost issues
Buying your freehold or extending your lease with a vesting order involves different considerations than doing so with an available freeholder.
In particular your own legal costs will be higher. In addition to going through the normal process of extending a lease or enfranchisement, your solicitor is also going to need to deal with the Vesting Order – including an application to the County Court and subsequently the First Tier Property Tribunal. You will also need to pay the costs of a specialist surveyor to provide a valuation of the appropriate premium.
However the good news is that there is no need to pay your freeholder’s reasonable legal or valuation costs – because there are none. And, because you haven’t got the freeholder to negotiate with, who will almost certainly try to drive the premium up, it’s common for the level of premiums set by the First Tier Property Tribunal under a Vesting Order, to be noticeably lower than they would have been in negotiations with the freeholder.
And in addition, the court does have the discretion to award a costs order. We regularly apply for these for our vesting order clients. These mean that the judge can order that the reasonable legal fees and 3rd party costs (e.g. press advertising and private investigator fees) that you’ve racked up in applying for your vesting order, can be deducted from the amount of the premium that you need to pay into court to be held for the freeholder – should they reappear at some stage in the future.
Need help with buying your freehold or a lease extension with an absent freeholder? Call us now
Wherever you live in England and Wales, our Solicitors can help. For a FREE initial telephone consultation from one of our specialist team;
• Call us today on FREEPHONE 0800 1404544 or
• Email us using our contact form for FREE initial advice and a FREE quote.