Once a company is dissolved, any property it owned immediately prior to dissolution will pass to the Crown pursuant to section 1012(1) of the Companies Act 2006.

Company property often becomes bona vacantia due to the following circumstances: -

• The company’s name is struck off the register (often for failing to file the required documentation that Companies House requires);
• The company fails to dispose of all property before carrying out a voluntary strike off;
• The liquidator of a company does not dispose of company assets when winding up the company due to insufficient record keeping (or property comes to light after the liquidation is complete / the company has been dissolved); or
• A liquidator disclaims property as onerous property under Section 178 of the Insolvency Act 1986 (IA 1986).

Such property is dealt with by the Treasury Solicitor as the Crown’s nominee.

A range of assets can fall to the Crown by operation of bona vacantia, one of these being property and land. If you own a leasehold flat or house, there will be a freehold interest known as a “freehold reversion” out of which your lease is granted. It is quite common for the title of a property to be split between freehold and leasehold title (more often than not will be the case where there is property which contains residential flats or mixed-use residential and commercial units). In these circumstances a management company will commonly be the proprietor of the freehold title (often known as “the Freeholder”) and the occupants of the property will be the proprietors of the leasehold title (often known as “the Leaseholders”).

Where this occurs and the Freeholder is dissolved either due to strike off or insolvency the freehold title of the property will vest in the Crown as bona vacantia. This can cause significant problems for the lessees in regard to their lease obligations, repair and maintenance, insurance and notably, the saleability of their property.

There are a number of ways in which you can regularise the freehold position of such a property, these include: -

• Administrative restoration of the company to the register at Companies House (by the former directors);
• Applying to the Court for company restoration; or
• Applying to the Court for an Order vesting property of the company in the applicant.

Where the freehold position needs to be regularised quickly and / or the directors of the management company have gone to ground these may not be viable options and in the alternative the Leaseholders may wish to approach the Crown directly in order to purchase the freehold reversion of the property themselves.

The purchase price of the freehold reversion will vary depending on the value of the individual flats / units, the ground rent under the leases and the number of years left to run on the leases. Though, more often than not the predominant value of the property is held within the leasehold title. Subsequently, the purchase price of the freehold title is often low and as such, it can be the least costly option when it comes to regularising the freehold position.

It is not mandatory for the Crown to sell the freehold reversion of leased property to the Leaseholders, though the Crown is often content to do so, particularly where the application made to them contains all the relevant information and documentation they require and is set out clearly to them. This is important, as if the Crown are not satisfied with the evidence provided within the application or the speed at which further information is provided, they may instead choose to simply disclaim the freehold reversion altogether and can do so without reference or prior notice to the Leaseholders.

Where property is disclaimed, it will escheat to the Crown Estate and the freehold reversion will be extinguished. The Crown Estate then becomes entitled to possession and can then sell this to any suitable buyer who approaches them for the best price that is fair and reasonable in all the circumstances. This means that the process is likely to be more costly generally (both in respect of purchase price and legal fees) and that the property could be sold to any third party. As such, the risk of the freehold reversion of such a property being disclaimed should be avoided where possible.

Get in touch today...

If you need assistance with such an application or require further information about any of the topics mentioned above, please get in touch with the author, Farhana Young, today:

E: fy@gosschalks.co.uk | T: 01482 324252

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