Is Selling a Property with an Absent Freeholder Easy?

Selling property with an absent freeholder can be tricky, but it’s not impossible. Some might think that selling is made even easier without a freeholder looking over the shoulders, but that couldn’t be further from the truth. An absent freeholder poses many challenges that could make the sale of your property more complex, slower to facilitate, and potentially much more expensive.

Difficulties you may encounter if you try to sell with an absent freeholder include:

• The buyer cannot get a mortgage
• The sales process may be extremely slow
• Essential property information may be unavailable
• The value may drop due to the lack of management and maintenance of common areas
• The lease becomes so short that it’s deemed too expensive to renew by both sellers and buyers

In this blog, we look at absent freeholders and how you can protect yourself to secure a sale.

What is a freeholder?

In simple terms, a freeholder is the person or business that owns the land a leasehold property is on. In the case of flats, they own the building aswell.

As a leaseholder, you might be paying a mortgage to secure ownership of the property, but the freeholder will have granted you a specific term that you can occupy it for. Don’t worry – the term is normally close to 100 years.

The freeholder is responsible for the maintenance, repairs and cleaning of the main building (not the property you live in) and often handles any disputes that arise between leaseholders. Furthermore, where ground rents and service charges apply, the freeholder will also set the charges and organise the collection of the funds.

What is an absent freeholder?

An absent freeholder is, quite simply, a freeholder who has become unreachable and no longer carries out their role as a freeholder. There is no predetermined time that classifies a freeholder as absent, but a freeholder becomes legally declared absent when all reasonable efforts to contact them have failed. This would include:

• Writing to their last known address
• Checking the Land Registry for their information
• Advertising in local news and online
• Checking probate records to see if they have passed away

Why is selling a property with an absent freeholder difficult?

If you are selling a leasehold property, a variety of issues may arise due to an absent freeholder. This can make it harder to sell, although not impossible.

No LPE1 form

The LPE1 form can be an essential part of selling leasehold property. It outlines the service charges, ground rent and other valuable information that a buyer needs to know. The form will need to be completed by the freeholder, but when they can’t be found, this becomes impossible.

Property left in poor condition

Whilst the interior of your home may look wonderful, the areas the freeholder is responsible for may have fallen into disrepair or show signs of ageing. With kerb appeal playing such an important part in a buyer’s decision, an unattractive property could turn them away before even getting to look at what your home has to offer.

This could see the property on the market for an extended period with no offers coming in or, at best, offers much lower than you’d expect.

Buyers cannot secure a mortgage

With lenders unable to get a clear picture of any existing issues with the property and uncertainty over insurance, maintenance and disputes, buyers may find it difficult to secure a mortgage. This then limits the seller’s market essentially down to auction houses or cash house buyers.

Limited information

Even if you, as the seller, know all there is to know about the property, there is a vast amount of information kept by the freeholder that you won’t have access to. Furthermore, the freeholder remains the point of contact for maintenance issues and wider concerns about the building. A new buyer will need the freeholder’s information if they require assistance, and if you’ve been unable to reach them, the new buyer won’t be able to either.

No Licence to Assign

Leasehold properties often have specific terms within their agreements relating to the sale of the property. One of them, known as the Licence to Assign, is where the freeholder must agree to the sale of the property. With the freeholder unreachable, you cannot seek permission to sell.

What about an absent freeholder indemnity policy?

Absent freeholder indemnity insurance will make selling a property with an absent freeholder much easier. Much like any other type of indemnity insurance, it protects those buying the property from circumstances that could otherwise find them financially or legally compromised.

An absent freeholder indemnity policy protects leaseholders who:

• Have not paid ground rent/service charges for the full amount, due to not receiving notice of any changes or charges
• Have conducted repairs or maintenance that would normally be the responsibility of the freeholder
• Face risk of prosecution from a freeholder due to any of the above issues

Along with an indemnity policy, providing comprehensive documentation for all other aspects of the property will benefit both parties, too. A management information pack can clarify a host of issues for buyers, avoiding potential property misrepresentation claims and compensation. By remaining open and honest about the freeholder missing, but providing sufficient property information, sellers help satisfy buyers and their solicitors.

Could I buy the freehold?

This could be a way to smooth your path to a sale, but it isn’t quick and easy. With ownership of the freehold, lenders are more inclined to lend, buyers feel more reassured about ownership, and changes can be made to the home without seeking the consent of a third party (except where planning permission, building regulations or similar apply).

If living in a block of flats, other leaseholders can team up and buy the freehold from the owner of its title. You’ll need at least half of the leaseholders to be part of the group, and then get the freehold valued. Under the Leasehold Reform Act 1993 A Section 13 can be served to the freeholder to begin what is known as Collective Enfranchisement. The freeholder must respond with a Section 21 within a specified time. Should they fail to reply or be unreachable, your consortium can apply for a vesting order, which then allows leaseholders to either extend the lease or buy the freehold.

How to sell a property with an absent freeholder

As mentioned earlier, it’s difficult to sell a property with an absent freeholder, but not impossible.

• Prove the freeholder is absent by showing all the methods used to contact them:
  • Land Registry search
  • Sent communications to the last known address
  • Placed public notices (online and in the press)
  • Checked probate records
  • Attempted contact through managing agents
• Secure the vesting order
• Set up a right to manage company (if required)
• Obtain an indemnity policy
• Remain open and honest with buyers, showing what you have done to manage the issue

You should consider your route to sale with care. Estate agents are naturally slow, and the issues with securing a mortgage alongside an uneasy buyer may make this a tricky way to secure a sale. You could also consider an auction house – these are often filled with investors who don’t mind issues surrounding a property. The only problem is that you have no guarantee it will ever sell, and the fees can be quite high.

If time is of the essence or the legal complexity is too great, a quick sale company like Sell House Fast may be a viable option. Companies like ours buy flats and any other property as is and can complete in just a matter of days. With no legal fees to cover either, you can sell your flat fast without any surprise charges or costly fees.