Absent landlords and freeholders – ways to obtain the freehold when your landlord is missing

This relatively obscure aspect of property law offers the opportunity for residential or commercial tenants of certain long leases to convert or “enlarge” their leasehold interest into a freehold interest without having to notify the landlord.  This is clearly of particular benefit where the landlord is absent.

Conditions for enlargement

Enlargement under section 153 of the Law of Property Act 1925 is available where:

• the lease was originally granted for over 300 years;
• there are over 200 years left unexpired;
• no ground rent is chargeable; and
• the landlord has no right to forfeit for breach of any of the tenant’s covenants.

The chance of all these prior conditions being satisfied is vanishingly small.  But these leases do exist and moreover the procedure will work even in an absent landlord situation.  If these conditions are satisfied, an application can be made to the Land Registry submitting what is called a deed of enlargement declaring that the lease should be enlarged into a freehold.  The solution is beguilingly simple and does not need to involve the existing freeholder, which clearly will not be an option where the freeholder is absent.

The Land Registry is now seeing an increased number of applications for enlargement, and it transpires that some long leases may have been granted specifically for the purpose of allowing the tenant to enlarge its title into a freehold.

What if the lease is lost?

Where the leasehold title is already registered at the Land Registry, and, following registration, the lease is lost and the landlord cannot be found, there is a solution.  The Land Registry is obliged to guarantee any title which it registers.

Where the lease is missing and the Land Registry is required to guarantee a freehold title which has been obtained by enlargement, it will place a restriction on the freehold title stating that it is subject to the lease.

If the lease is ever recovered, the freehold title might be defeated on the basis that one or any of the prior conditions referred to is not satisfied. For example, ground rent is chargeable, or the landlord has the right to forfeit for breach of covenant.

One way around this might be to take out indemnity insurance against the lease turning up.  Insurance is however rarely straightforward and not an optimal solution where there may be a genuine risk, noting that a lender or subsequent buyer might be put off by such an arrangement.

Ways to acquire your freehold where the enlargement conditions are not met and the landlord is absent

There are however alternative ways to acquire your freehold where the landlord is absent.

Before exploring this, it is important to establish that the tenant is holding evidence that they have taken sufficient steps to locate the landlord in question and they cannot genuinely be found. Such steps could include, but are not limited to, placing a statutory advert in the London Gazette, adverts in local newspapers/magazines within the vicinity of the property in question, search of the probate register and obtaining a tracing agent’s report. This will assist with any First-tier Tribunal/Court application, should this be necessary.

If the property is a single house, even if the lease and/or the freeholder is absent, the Leasehold Reform Act 1967 allows an application for a vesting order to be made to Court to acquire the freehold, subject to the tenant otherwise qualifying to acquire the freehold pursuant to the 1967 Act.  A valuation of the freehold interest would have to be carried out and an amount representing the value of the freehold interest, which would need to be determined by the First-tier Tribunal, and paid into Court. This sum will remain in the event that the former freeholder is located in the future, and they will be entitled to obtain the funds which were vested with the Court.

Likewise, if the property is a single flat or a building divided into flats, and the landlord is missing, the Leasehold Reform, Housing and Urban Development Act 1993 allows an application to be made to Court to acquire an extended lease of a single flat or otherwise for the tenants to get together to acquire the freehold, subject to all qualifying criteria pursuant to the 1993 Act being satisfied.  An appropriate valuation would need to be carried out and the sum determined by the First-tier Tribunal paid into Court.

Where the landlord of a building containing at least two flats is missing, the Landlord and Tenant Act 1987 offers another solution, depending on whether the landlord is a company or an individual.  UK limited companies can never be “missing” even if they have been struck off or dissolved and no longer exist.  Other ways to acquire the freehold exist in those cases.

An individual can however be deemed absent or missing.  In that situation an application may be made to Court on the basis that the landlord is missing and therefore incapable of fulfilling its obligations under the lease, which presents a risk to the building.  Assuming that the Court is satisfied that the landlord cannot be found, it will usually grant an order that the freehold may be acquired by the tenants subject to payment of a sum into Court which equates to the value of the freehold.

These solutions are all derived from complex legislation on which expert advice should be sought.

Services we offer in this area

• advising as to the possibility of enlargement or the alternative of using one of the statutory procedures described above;
• preparing the necessary deed of enlargement and making the application to the Land Registry;
• undertaking tracing exercises to collate evidence that the freeholder genuinely cannot be found and attempts have been made to track down the absent freeholder; and
• where the statutory procedure has to be followed, assisting with the valuation process and making the necessary applications to the First-tier Tribunal and the Court.

If you have any questions regarding this subject please contact Katherine Simpson of the Residential Property team, or any member of the Property Litigation team.