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When a freehold-owning company has been dissolved, (or an individual freeholder becomes bankrupt), reversion of property to the state in the absence of legal heirs or claimants (escheat) can still occur in England and Wales.

This usually means that all the property held is ‘vested in’ (transferred to) the Official Receiver or Trustee in Bankruptcy. Leaseholders can serve on either parties a Notice of compulsory acquisition and because they are both acting as landlord for the time being, both are equally bound by s85 of the Leasehold Reform, Housing & Urban Development Act 1993 to respond, by serving a Counter-Notice.

However, the Receiver/Trustee can refuse to accept that property by disclaiming it which affects a few hundred properties a year. This is where freehold property, (such as the common parts of a block of flats) would ordinarily pass to the trustee for them to realise in order to pay the bankrupt’s debt. If the property is split into leased flats, (which gives a freeholder an obligation to spend money), the bankruptcy means not only is the property no longer theirs but the disclaimer destroys the freehold estate as well so that the land ceases to be owned by anyone! It therefore becomes land held by the Crown ‘in demesne’ (of an estate) occupied by the owner, not by tenants.

If the property is likely to be of any use to the Crown, it can ‘complete’ the escheat, by taking steps to exert rights as owner. If it does not, the land is effectively in limbo.

Freehold Transfer

However, the leaseholders of the flat or their mortgagees (mortgage providers) can exercise the rights given them by the Insolvency Act 1986 to have the freehold property transferred to them. This is the main difference between escheat and bona vacantia.

The Treasury Solicitor will usually sell the freehold to the leaseholders at open market value or less. This must be done by negotiation and there is neither the need (or the legal ability) to serve an Initial Notice. The proceeds of sale will then be transferred to the Exchequer to be dealt with in the same way as money raised by general taxation.

ADMINISTRATIVE RESTORATION

Where the leaseholders are directors and/or shareholders of a company which owns the freehold through a company which has been dissolved, the freehold may be acquired under the rules of administrative restoration.

The procedure involves 3 key conditions that must be met if the Registrar is to consider the application:

  1. The Registrar must be satisfied that the company was carrying on business or in operation at the time of its striking off (see below) which would be made obvious by the fact that at the time of being struck off the Register, the company’s main asset was the freehold. An up to date office copy entry of the freehold will serve as evidence to satisfy this condition;
  2. If any property previously vested in the company has vested ‘bona vacantia’, the Treasury Solicitor representative must signify to the Registrar in writing, consent to the company’s restoration. This is called a ‘Bona Vacantia Waiver Letter.’ The Treasury Solicitor’s current fee for applying for such consent is £79.00.
  3. The final condition is that the leaseholders will need to provide to the Registrar such documents as are necessary to bring up to date the records kept by the Registrar and pay all penalties outstanding at the date of striking off.

Note: Only a former Director or former member of the company at the time the company was dissolved, can apply.

 

 

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