Deeds of enlargement and other ways to obtain the freehold when the 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 to convert it into a freehold interest without having to notify the landlord.
Enlargement under section 153 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 if the landlord is missing.
However, where the leasehold title is already registered at the Land Registry, and, subsequent to 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.
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.
This can lead to some complexities, raising further questions as to the status of the newly acquired freehold interest. Uncertainty regarding the practical effects of deeds of enlargement, tarnishes the appeal of this otherwise beguilingly simple solution.
There are however other ways in which you can acquire your freehold if your landlord is missing.
If the property is a single house, even if the lease and/or the landlord is missing, the Leasehold Reform Act 1967 allows an application 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 determined value of the freehold interest paid into 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. Appropriate valuations would need to be carried out and the determined sums 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.
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Please note that this blog is provided for general information only. It is not intended to amount to advice on which you should rely. You must obtain professional or specialist advice before taking, or refraining from, any action on the basis of the content of this blog.
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