Missing Landlord: an alternative solution

Many of you will be aware that when a long residential Leaseholder of a flat has a missing Landlord the Leasehold Reform Housing and Urban Development Act 1993 provides a remedy. The process involved requires a Court application and then a determination of the price by the Leasehold Valuation Tribunal using the valuation principles under the 1993 Act, as amended. This means that if the Leaseholders hold leases with less than 80 years remaining then they will have to pay an element of marriage value.

Under the Landlord and Tenant Act 1987 Part III there is an alternative method which may be used. This may be a better route due to the valuation formula used which is believed to be more favourable to Leaseholders in that generally they will not have to pay marriage value.

Under the 1987 Act if there is a building consisting of 2 or more flats held by qualifying Leaseholders (i.e. long leases) and they amount to more than 2/3rds of the total number of flats then the Act may apply (section 25). The commercial parts of the building must not exceed 50% of the total internal floor space ( so further reason why this method can be used rather than the 1993 Act). Subject to these then the 1987 Act will apply.

The starting point is then to look at Sections 27, 28 and 29 of the 1987 Act. Under Section 27(3) when the Landlord is missing an application to the Court can be made to dispense with the service of a Notice. The application can then be made for an Acquisition Order and under Section 29 if the Landlord is not carrying out their management function, which includes repair, maintenance and insurance of the property, as required by the lease (and almost by definition if there is a missing landlord and no intermediate Management Company they will not be) then the Court may make an Acquisition Order. The Order may be on such terms as the Court thinks fit but they will refer the question of price to the Leasehold Valuation Tribunal.

Under S. 33 where the Landlord is missing then the Senior President of the Tribunal shall select a surveyor to determine the price payable. This will be on terms that the interest may realise if sold on the open market and that the assumption that none of the Leaseholders were seeking to buy. Generally it is believed that in instances where marriage value would be payable under the 1993 Act this may be a more favourable valuation method.

The LVT will then make appropriate directions as to the price and other terms. The court may then execute the transfer and subject to paying the monies into Court the acquisition can be created.

Whilst all routes involving missing Landlords are perhaps cumbersome it is worth thinking which route is best. Discussion with the professional advisers is best at an early stage to consider fully the best valuation method. From a time perspective given the actual processes are similar then little can be gained. It is also worth bearing in mind that in instances where a Manager has been appointed under the 1987 Act then provided the Manager has been appointed for not less than 2 years then this method can also be available.

If you have such a situation then we would be happy to advise.

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