What is an Absentee Freeholder or ‘missing’ landlord?
An absentee freeholder or missing landlord situation is where you are a leasehold owner of a property and your landlord does not communicate with you and cannot be found. Most leases provide for the landlord to insure the building and assume various responsibilities and by virtue of the fact that they cannot be found, it is fairly safe to assume that the landlord is not complying with his obligations under the lease.
What may be considered to be a defect in the title with a residential lease one day may not be a serious issue in a few years’ time. The same logic applies in reverse; what may not be considered to be a particular legal problem now may nevertheless be a significant issue in years to come and could have a major impact in terms of your ability to sell the property in the future.
Problems that can arise with Absentee Freeholders
An absentee freeholder may not be of concern to you on a day to day basis; you may indeed regard this as a blessing on the basis that you are not paying ground rent and do not have a landlord enforcing works to the building. You may have considered getting around the fact that the landlord does not arrange insurance by arranging insurance yourself (although that is not without legal and technical issues). When works are necessary to the building the chances are that you can negotiate with any other flat owners what works should be done and how the costs are to be split.
This does not mean to say that there cannot be practical issues in not having a landlord (such as enforcing the provisions of the other leases for properties in the building); in the vast majority of cases, it does not present a practical problem until you come to try and sell the property.
Obviously, if there was an absentee landlord and there was a particularly short lease then the fact that there is a missing freeholder dramatically heightens the problem of a short lease and in those circumstances the purchaser’s Conveyancing Solicitor and the buyer will have obvious concerns, but provided that the lease had more than 70 years remaining and in the majority of cases, the parties would proceed (in most cases with taking out indemnity insurance).
Do mortgage lenders accept indemnity insurance if the landlord is absent or insolvent?
Over the last 10 years during an extremely buoyant property market, the legal concern of an absentee landlord has been like a crack in the wall that has simply been papered over. It has largely been ignored by vendors, buyers and purchasers’ Conveyancing Solicitors alike who on the whole accept absentee landlord indemnity insurance as a solution to the problem. This was partly due to the fact that sellers would be in such a strong position that they could pretty much dictate a “take it or leave it” approach to a buyer. A seller would essentially tell the agent and the buyer that if this buyer does not buy the property there is another buyer around the corner who will purchase the property. From a buyer’s perspective, a missing landlord, as mentioned above, does not really concern them from a practical perspective.
Lenders’ attitudes are changing however and an increased number of lenders have changed their requirements on the minimum lease term before they are prepared to lend. They have also changed their attitude towards indemnity insurance, specifically on absentee landlords. A number of lenders have stated that, whereas they would have lent on an absentee freeholder in the past, they will no longer do so. A similar tightening of requirements has also applied to flying freeholds and creeping freeholds.
Instructing a Fridaysmove-recommended Conveyancing Solicitor
Sellers with an absentee freeholder or missing landlord, or any unique property (and most properties do have a unique defect or issue) require the most experienced Conveyancing Solicitor to help finesse a Conveyancing transaction through to completion by dealing with any potential issues and concerns at an early stage.
For more information about Conveyancing services for your home move, contact Fridaysmove on 0330 660 0286.