I would have thought an absentee freeholder would assist the sale of my property as it means that I do not have a third party charging me excessive service charges, ground rent or interfering with my enjoyment of the property. Is this not the case?
The point here is logical and most would think this correct. Landlords and managing agents often have a bad press because there are certain rogue landlords or managing agents who make the life of the leaseholder very difficult. However, from a lender’s perspective (and often from a practical perspective), an absentee landlord can be a nightmare. Now let us consider the lender’s requirements first.
Lenders and Absentee freeholders
Almost every lender in the UK is reluctant to lend on a property where there is an absentee landlord and even those that do lend on properties with an absentee freeholder will insist on absentee landlord indemnity insurance. It is worth noting that some lenders point blankly refuse and even with indemnity insurance. The more negative the lender’s approach is towards absentee freeholders the more that impacts the market place for buyers. Please see question below as to why lenders do not like lending on absentee freeholders.
Practical Issues with an absentee freeholder
In most leases the landlord has a number of obligations as set out in the lease. This normally includes insuring the building, maintaining the building, enforcing the obligations of the lease on other leaseholders in the building. Whilst the majority of cases where an absentee freeholder exists the tenants frequently club together and resolve management issues and disputes amongst themselves, there are many occasions where the leasehold conveyancing team at Fridaysmove have had to resolve difficulties with tenants who, in an absentee freehold situation, refused to pay service charges or insurance contributions.
Why do lenders not like to lend on leasehold properties with an absentee Landlord?
The short answer is that is purely down to marketability.
The reason why leasehold properties with an absentee freeholder are less marketable is because the terms of the lease cannot be enforced or are very difficult to be enforced in the absence of a freeholder. The mortgagee would be concerned that in the event that they need to repossess the property they will have a limited market to sell to. It is worth bearing in mind that over the last few months a number of lenders have tightened their requirements to conveyancing lawyers and in particular requirements relating to leasehold properties. There are a number of lenders who have changed their minimum lease term requirement. Whilst there have not been many lenders who have changed their requirements concerning absentee landlords it is not beyond the realms of possibility that an increasing number of lenders will refuse to lend on leasehold properties with an absentee landlord.
Is it possible to forcibly purchase the freehold reversionary title from an absentee freeholder?
The answer to this is yes, but purchasing the freehold off an absentee landlord is a fairly complex area of conveyancing. If you wish to purchase your freehold reversion and have an absentee freeholder, then please speak to our leasehold conveyancing team who can give you general advice on Vesting Orders and enfranchisement generally. For more specific information concerning Vesting Orders please see Vesting Orders Explained – How to purchase your freehold off an Absentee Freeholder.
Is not absentee freeholder indemnity insurance the solution to the problem?
No. You need to make an informed decision when it comes to the question of Absentee Landlord indemnity insurance. We suggest that you consider and talk to your conveyancing lawyer about ensuring that the insurance meets your needs what the consequences could be for you if the missing landlord reappears. Please do take into account whether the property has features which if lost, would not be adequately compensated for by a monetary payment off the insurers .
How do I find out if the lender is prepared to lend on a property with an absentee freeholder?
First, do not ask the member of the staff at the local bank or building society with whom you are obtaining a mortgage. They simply will not know. Ultimately the question has to go to underwriters or the legal team within the appropriate bank or building society. 98 per cent of banks and building societies publish an indicator as to whether or not they would be prepared to lend on an absentee freehold property through the CML Lenders Handbook (Part 2). This is not an easy site to navigate and please feel free to call our leasehold conveyancing team who will be able to carry out the search for you and give you further advice on absentee freehold issues generally.
Is sale or purchase conveyancing any more expensive for people who are buying or selling a leasehold property with an absentee freeholder?
We cannot answer this question for other conveyancing firms but at Fridaysmove there is no supplemental or additional fee specifically for dealing with an absentee freeholder situation. Obviously, should you retain us to apply to the County Court for a Vesting Order then we would charge specifically for that piece of work. Fridaysmove operate a fixed fee conveyancing process subject to additional fees outlined in our terms of engagement which do not apply in the vast majority of cases. An example might be signing a guarantee for specific works to a property from the vendor to the purchase. For further clarification as to costs for buying or selling a leasehold property with an absentee freeholder please contact our leasehold conveyancing team.