When it comes to ownership of a block of flats, (or houses) the freeholder remains at the top of the tree but today they come in far more guises than they used to. Not only can they still be individuals they can also be finance companies, ground rent investment companies, mixed use companies (owning both commercial and residential properties in the same development), Leasehold Resident Management Companies (companies comprised of leaseholders) or a local authority.
Some blocks of flats have more than one freeholder because whilst a freeholder holds what is known as a superior lease, they can choose to sell what is called an ‘intermediate’ lease to someone else, who is known a head-lessee. This then results in 3 different levels of ownership in the building:
- The freeholder who has the highest level of overall ownership;
- The head leaseholder (also called the head lessee) who is directly responsible to the leaseholder;
- The leaseholder.
Covenants and Absent Freeholders
Both leaseholder and freeholders enter into covenants contained within the lease. The freeholder will covenant to give quiet enjoyment (this is implied) and to carry out the repairs and maintenance of the common areas as it is the freeholder who owns them. These common areas are comprised of the structure, the building, gardens, paths, garages and any outbuildings and inside, the plant rooms, lift motor rooms, and meter cupboards and any other areas that are now owned by individual leaseholders. Freeholders may also covenant to give (in some blocks), caretakers, scheme managers and porters. Most freeholders will however use the services of a managing agent to comply with their covenants on their behalf but it will be leaseholders who pay for the services they give.
However if the freeholder cannot be traced then they are deemed ‘absent’ and so their covenants cannot be met. Reasons for ‘absent’ landlords are varied but they can include death, bankruptcy, imprisonment or simply not wanting to be found.