When landlords go missing, a not-infrequent occurrence, it leads to a host of problems. There is the obvious failure to fulfil obligations such as keeping the property in a liveable condition, and tenants are often left without insurance in the case of fires. In response to such problematic absenteeism, leaseholders may group together and acquire the freehold from the landlord through collective enfranchisement. This enables the leaseholders to manage the building and fix the problems themselves. They can even control their own lease terms, granting themselves new leases, for example.
Acquiring the freehold
Acquiring the freehold is achieved through an application to the courts, either through the Landlord and Tenant Act 1987 or the Leasehold Reform Housing and Urban Development Act 1993. Either way, the leaseholders must demonstrate an attempt to trace the missing landlord before submitting an application. This could mean placing an advert in a local newspaper or hiring an investigator.
The procedure under the Landlord and Tenant Act
If under the terms of the lease an absent landlord has obligations with regards to repairs, maintenance and insurance, then there will likely have been a breach of these obligations. Should this be the case, a majority of qualifying tenants can pool together and submit an application to the county court, seeking an acquisition order under the Landlord and Tenant Act.
A further application is then made to the tribunal, and a surveyor will determine what constitutes a fair and reasonable premium for the freehold. The advantage of this procedure is that if the landlord has failed to fulfil his or her maintenance and repair obligations, these costs will be charged to the landlord. The legal costs can then be subtracted from the value of the freehold, meaning that the leaseholders will pay less, and often nothing extra, for the freehold. The sum of the premium is paid into the Courts Fund Office, and a judge signs the transfer of the freehold.
The procedure under the Leasehold Reform, Housing and Urban Development Act
Should there have been no breach of the landlord’s obligations, leaseholders may not be able to acquire the freehold through the Landlord and Tenant Act. Instead, a majority of the tenants may make an application to the county court to compel the landlord to sell the freehold, as provided for by the Leasehold Reform, Housing and Urban Development Act.
An application for a vesting order will need to be made, which transfers the freehold to a nominee leaseholder or a company formed by the leaseholders. An application is then submitted to the tribunal to determine the price for the freehold. As the absent landlord will be unable to dispute the valuation, the tribunal will only take into account the price proposed by the leaseholders when calculating the freehold value. The determined sum will then need to be paid and an order will be made for the transfer of the freehold.