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Joshua, Lawyer
Category: Law
Satisfied Customers: 26070
Experience:  LL.B (Hons), Higher Prof. Dip. Law & Practice
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I have recently put an offer on a property and it now transpires

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I have recently put an offer on a property and it now transpires that the immdiate landland applied for liquidation towards the end of last year. Should I continue with the purchase as I don't know how a 'landlord in liquidation' will comply with its obligations under the lease i.e. maintenance, insurance. My property is a flat in a fairly large complex. Thank you.
Hello and thank you for your question. I will be very pleased to assist you. I'm a practising lawyer in England with over 10 years experience.

May I ask how many other properties there are in the block please?
Have you asked the leaseholder whether they have evidence of payment of ground rent and service charge of maintenance up to date?
Customer: replied 2 years ago.

Not exactly sure, may be somewhere between 50-100. I am waiting to hear about your second query.

Thank you. The purchase of a leasehold property where the landlord is either in liquidation or is about to be made insolvent brings with it both risks and potential benefits. The potential benefit is that if the landlord is made insolvent, it is quite likely that the freehold itself will be offered up for sale by the liquidator and by law he must first offer it to the tenants of the building. There is therefore the opportunity for you or a collection of the other tenants together to acquire the freehold for what is often a reduced price. If you do not wish to buy the freehold, sometimes a third party will be found who wishes to buy the freehold and sometimes no third party will be found in which case the freehold will pass to the Crown "bona vacantia" (where no one claims the title property passes to the Crown). this can potentially allow the freehold to be acquired for as little as nothing and acquiring the freehold will typically add value to property, potentially significant value if your lease has less than around 90 odd years remaining on it. So that is the potential prize. As to the risks...if there is no solvent freeholder, you will need to ensure you are satisfied with evidence the seller of the flat can provide to you that he is paid round rent for the last six years. The landlord can potentially claim arrears of ground rent for up to 6 years and so if the freehold was acquired by someone else, if you cannot show evidence that the ground rent was paid by the present owner, you may find yourself liable to pay up to 6 years of previous ground rent to the new freeholder. If the seller cannot produce evidence that ground rent has been paid, you may need to ask the seller for a retention or an allowance (essentially money off the property) to cover this potential risk. A similar situation is the case with regards ***** ***** charge for maintenance although here, the period is shorter as the landlord must issue any service charge demand within 18 months of incurring the cost.Also because there is no active landlord, you will need to consider asking for absent landlord indemnity insurance to protect yoursel and satisfy your lender. In practice, your solicitor should deal with all of the steps and will ask the seller all the appropriate questions and although you can rely entirely upon your solicitor in this respect, it does no harm to read the information given by the seller yourself and satisfy yourself upon the above points and take your advicein how to mitigate any risks that are identified. The above I likely to be the main areas of risk but it is important to consider all the information given by the seller in response to your solicitors enquiries to assess whether there is anything else you need to consider.generally speaking, a liquidated landlord should not necessarily be a showstopper because as above, it can have potential benefits in terms of acquiring the freehold in the future, so long as you ensure, or more to the point your solicitor ensures that he covers all of the potential risks associated with an absent landlord.I hope the above is of assistance? If you have no further questions for now I should be very grateful if you would kindly take a moment to click to rate my service to you today or just reply back to let me know if the above is helpful. Your feedback is important to me. If there is anything else I can help with please reply back to me I'd be very grateful
Customer: replied 2 years ago.

Thank you very much for your helpful advice - your response is very clear. If you don't mind be asking one moe thing - how comes the property was on the market when the landlord was in liquidation - I realise it could have happened at any time during my purchase but I do feel duped that the seller was marketing their property when there was an unresolved matter.

Thanks again

I'm glad the above was of assistance. A good question. This is because the origianl proerty is freehold and this is what the landlord owns. However out of the freehold is "carved out" leasehold flats. Imagine the property as a cake. When it is first baked the landlord owns the whole cake but as he sells off the individual flats in the building (imagine them as slices) he owns less and less of the building (cake). If he sells off all the flats and any garden with one or more of the flats then all he has left is any common passageways and the right to collect ground rent (I think I am stretching the analogy to come up with equivalent parts of a cake to represent these things).But anyway each leasehold flat is in law a proprietary interest in itself and is capable of being sold quite separately to the freehold which is what the ladnlord owns. So you are looking at buying a leasehold interest in a flat (a "slice" in my above analogy) which is capacble of standing on its own and being sold and mortgaged. My view is that ideally you with or without the other tenants will wish to look at potentially acquiring the freehold as it will add value to your properties and will make any future sale simpler because buyers will not be asking the questions you are not considering but since you are just looking to buy you have plenty of time before you would look to sell in the future to make some decisions about the freehold and regularise the position. Accordingly you could potentially look to leverage the present situation to negotiate on the price though the lack of landlord should not impact the price in any significant way but its worth a shot) and hopefully profit from eventually regularising the position in the future by looking to acquire the freehold perhaps jointly with some fellow residents.I hope the above is helpful? Can I help you with anything else or has the above answered your questions satisfactorily? If you could drop me a quick message to let me know I'd be very grateful.
Customer: replied 2 years ago.

Many thanks again for your very helpful and clear response. I think you have answered all my points very well. I will now mull things over. Thank you again.

A pleasure. Good luck with your purchase if you decide to go forward with it.
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