Bona Vacantia explained to flat owners

Bona vacantia is a Latin term that refers to property that has no owner. In the context of flat ownership, bona vacantia may be relevant if the freeholder of the building goes missing or becomes insolvent, and there is no one to take on the responsibility of managing the building.

If the freeholder of a building becomes bona vacantia, the government’s Bona Vacantia Division may become the legal owner of the freehold. This means that the responsibility for managing the building, collecting service charges, and making decisions about repairs and maintenance will pass to the Crown.

As a flat owner, this can have implications for your rights and responsibilities. You may be required to pay your service charges and ground rent to the Crown, rather than the original freeholder or management company. You may also need to seek permission from the Crown for certain actions, such as making alterations to your flat or subletting it.

If the building is in disrepair or in need of maintenance, it may be more difficult to get these issues addressed if the freeholder is bona vacantia. However, the Crown has a duty to manage bona vacantia property in a responsible way, and may appoint a professional property manager to handle the day-to-day management of the building.

If you are a flat owner in a building where the freeholder is missing or has become insolvent, it’s important to seek legal advice to understand your rights and responsibilities. You may also want to consider taking action to try to locate the missing freeholder or to purchase the freehold collectively with other flat owners, through a process known as enfranchisement.

When should I extend my flat’s lease?

Deciding when to extend the lease on your flat can depend on a number of factors, including the current length of the lease, the value of the property, and your future plans for the property. Here are some things to consider:

  1. Lease length: Generally, it’s a good idea to extend your lease when it has less than 80 years remaining. This is because the cost of extending the lease increases significantly once it drops below 80 years, due to the way that the calculation is made.
  2. Property value: Extending the lease can increase the value of your property, so it’s worth considering the potential return on investment when deciding whether to extend the lease.
  3. Future plans: If you plan to sell the property in the near future, extending the lease may make it more attractive to buyers. On the other hand, if you plan to keep the property for a long time, extending the lease may not be as urgent.
  4. Costs: Extending the lease can be expensive, so it’s important to consider the costs involved and whether you can afford them. You may also need to factor in the costs of professional advice, such as a surveyor or solicitor.
  5. Negotiation: If you decide to extend your lease, you will need to negotiate with your freeholder. It’s important to understand your legal rights and seek professional advice to ensure you get a fair deal.

Ultimately, the decision of when to extend your flat’s lease will depend on your individual circumstances. It’s important to consider all the factors involved and seek professional advice to help you make an informed decision.

What to do if your freeholder is missing

If your freeholder is missing, it can be a complicated situation to navigate.

Here are some steps you can take if your freeholder is missing:

Check your lease agreement

Your lease agreement should include contact details for your freeholder or the management company responsible for managing the property. Check if there are any provisions in your lease that address what happens if the freeholder goes missing.

Contact the managing agent

If your property is managed by a management company, contact them to see if they have any information on the freeholder’s whereabouts or contact details.

Check with the Land Registry

You can check with the Land Registry to see if the freehold title is registered and if there are any contact details available. You may need to pay a fee to access this information and find out the outcome if you believe your freeholder is missing.

Seek legal advice

If you have tried the above steps and still cannot locate your freeholder, you may need to seek legal advice. A solicitor can help you understand your options and advise you on the best course of action. You can contact us if you feel you are in need of legal advice.

Consider enfranchisement

If you and the other leaseholders in your building are interested in purchasing the freehold, you may be able to do so through a process called enfranchisement. This would give you more control over the management and maintenance of your property.

It’s important to take action if your freeholder is missing, as it can have implications for the management and maintenance of your property. Seeking legal advice is often the best course of action to help you understand your options and ensure your rights are protected.

About the Author:

With over a decade’s experience in leasehold law, Ian Mitchell heads up the leasehold services department. He is based in our Streatham office. Ian enjoys being able to give his clients certainty of outcome. He specialises in advising leaseholders and freeholders on their statutory rights regarding flat ownership, including the right to buy, right to manage, leasehold extensions, and leasehold enfranchisement.

Leases, how long is long enough?

Leases have been in the press recently for all the wrong reasons.  One issue is rent and that will be the subject of a separate blog; length or ‘Term’ as it is known, is discussed here.

Given that when you buy a property with a remaining lease Term longer than your mortgage and probably longer than you expect to live, what is the problem?

In a nutshell, a number of lenders have become sensitive to lease length; most buyers require a mortgage to purchase and if the property is not easy to mortgage you reduce the pool of potential buyers and that in turn devalues your property as fewer people can buy it.

In general, lenders agree new leases of flats should be 125 years or more at grant and new leases of houses should be 250 years or more.  There is less uniformity concerning the remaining Term of existing leases but recently a number of lenders have specified a minimum remaining Term of 85 at the date of purchase.  This appears to be calculated by taking 80 years (the length at which the cost of extending a lease, for technical reasons, increases dramatically), adding two years which is the time you need to own a lease before you are entitled to extend it by right, and adding a further three years for good measure.

It follows, that anyone buying leasehold property with a remaining Term of close to 85 years needs to factor into their purchase the cost of extending their lease and should they let the Term drop below 80 years before extending that cost will increased dramatically and continue to increase year on year.  Anyone planning to sell with a remaining lease Term of less than 85 years need to extend in good time too, as the process can take a number of months.

* Disclaimer: The information on the Anthony Gold website is for general information only and reflects the position at the date of publication. It does not constitute legal advice and should not be treated as such. It is provided without any representations or warranties, express or implied.*

Collective Enfranchisement: Doing A Deal Outside The 1993 Act, Right of First Refusal Consequences

When purchasing your freehold there are two ways in which this can be done; the formal route of serving a Section 13 Notice or an informal approach to the freeholder to ‘do a deal’.

The formal route of serving a Section 13 Notice is governed by the Leasehold Reform, Housing and Urban Development Act 1993 and offers more protection in that once the Notice is served, so long as you meet the qualifying criteria, your landlord has to sell the freehold interest to you.  By dealing with the freeholder outside of the 1993 Act there is nothing to stop your landlord at the last minute refusing to sell the freehold interest to you or trying to ask for an unreasonable purchase price.

However, there may well on occasion be an advantage to doing a deal outside the 1993 Act.  Firstly, your legal fees will be cheaper as there should not be as much work involved so long as terms can be agreed relatively quickly.  Secondly, if you have a reasonable landlord who is willing to offer you a fair deal it is likely to save you both time.  If you are unsure of your landlord’s nature it might be worthwhile approaching them informally first and if they seem unwilling then serve them with a Section 13 Notice.

There are certain things to watch out for before accepting an informal deal where 100% of the flat owners in the building are not participating in the deal.  Under the Landlord and Tenant Act 1987 (as amended by the Housing Act 1996) a landlord who is wishing to dispose of their freehold interest must offer it to the leaseholders in the first instance with more than 50% of the qualifying flat owners being entitled to take up the offer.  This would be done by way of a Section 5A Notice.  So if a landlord is approached informally by someone wanting to buy their freehold they must make sure the other flat owners are not able to force resale of the freehold interest to them after completion by virtue of breaching the 1987 Act.  A landlord that does not serve a Section 5A Notice on their leaseholders before disposing of the freehold interest informally will have committed a criminal offence.

The Right of First Refusal legislation does not apply for freeholds where the landlord is a local authority and to most housing associations.

The new owner of the freehold will have to inform the leaseholders in the building of their assumed ownership in compliance with Section 3A of the Landlord and Tenant Act 1985 outlining the leaseholder’s rights to information regarding the sale.  If the leaseholders believe it has been disposed of in contravention of the Right of First Refusal they would respond to the new landlord with a Section 11A Notice requesting full information of the sale terms.  The leaseholders can force the new freeholder to sell it to them under the same terms as what they purchased it for.  A minority of the leaseholders in the building will not be able to take issue with the transfer.

Leaseholders that do wish take issue with any informal disposal of the freehold interest availing of the Right of First Refusal legislation would have to meet the qualifying criteria of collective enfranchisement.

The Right of First Refusal governance does not typically apply to 1993 Act collective enfranchisement transactions.

If you are a leaseholder who believes their freehold may have been sold illegally and wish to commence a Right of First Refusal claim please contact the Leasehold Services Team at Anthony Gold Solicitors who would be happy to assist.  Or perhaps you are a landlord wanting to dispose of your freehold interest to one or more of the leaseholders or an unrelated third party, please contact us for expert advice.

* Disclaimer: The information on the Anthony Gold website is for general information only and reflects the position at the date of publication. It does not constitute legal advice and should not be treated as such. It is provided without any representations or warranties, express or implied.*

Valuing lease extensions became too easy until “Mundy”

Knowing what it should cost to extend your flat’s lease was until May/June 2016 fairly simple for the experts. The valuation approach was based off averaging the established relativity graphs. This put valuation on a stable platform. Flat owners could punch into a lease extension calculator the approximate value of their flat with a long lease and the calculator would output an accurate premium.

The Tribunal changed its adopted approach for assessing relativity for different lease lengths in May 2016 in the Upper Tribunal decision of Sloane Stanley v Mundy and Others.

The primary method of valuation suggested in this decision is to use real world transactions adjusted for 1993 Act rights, where sale evidence is unreliable or unavailable a comparison of the graphs and consideration of which graph ought to apply should be undertaking. The Tribunal no longer favours the commonly used method of averaging the graphs of relativity.

This decision will assist landlords to establish higher premiums and could destabilise the market for short lease sales outside of central London.

Valuation just got a whole lot more complicated.

* Disclaimer: The information on the Anthony Gold website is for general information only and reflects the position at the date of publication. It does not constitute legal advice and should not be treated as such. It is provided without any representations or warranties, express or implied.*