At the Top of the Tree
When it comes to the 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 but 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.
Like leaseholders, freeholders will enter into covenants (promises) to do certain things. One such covenant is that of quiet enjoyment (this is implied) which is a promise that leaseholders will be able to enjoy the use of the premises in undisturbed peace. They will also covenant to carry out the repairs and maintenance of the common areas because they own them. The structure, the building, gardens, paths, garages and any outbuildings and inside a block of flats, the plant rooms, lift motor rooms, and meter cupboards are all their responsibility, along with any other areas that are not owned by individual leaseholders. Freeholders may also covenant to provide (in some blocks), caretakers, scheme managers and porters.
Like leaseholders, freeholders enter into covenants (promises) to do certain things but if they are deemed absent (which means that all attempts to find it have failed) such covenants cannot be met.
Reasons for ‘absent’ landlords are varied but they can include death, bankruptcy, imprisonment or simply not wanting to be found.
So how do you prove you have an absent freeholder? By carrying out the following steps:
- Serving a notice of claim on the freeholder’s last known address or the same notice served in the London Gazette or a local paper;
- Sending a request sent to the court to dispense with the serving of a notice;
- A search of the Land Registry to make sure that the freeholder no longer owns his last known address, has moved to an unknown address or the services of an Enquiry Agent has been engaged;
- Provide witness statements confirming that a visit to the Freeholder’s last known address yielded no forwarding address, or;
- Provide an absent freeholder title indemnity policy that a recent purchaser of a flat may have taken as a condition of securing the mortgage.
The greatest power within the freeholder/leaseholder relationship is still the ability of the freeholder to forfeit the lease (i.e. take away both the lease and the property) when leaseholders breach their lease terms. Such breaches will be financial (i.e. service charge arrears) or those of disrepair. It is not an easy decision for small freeholders to reach (i.e resident management companies who own the freehold rather than the big commercial freeholders) not to mention the fact that not all breaches are capable of remedy.
More on forfeiture can be read here.