From solvent to insolvent then back again

What happened previously when a Company is struck off?

Ordinarily, when a company is struck off the companies register and dissolved, any property belonging to the company transfers to the Crown. If the property carries any liabilities the Crown is most likely to disclaim the property. The effect of a disclaimer is that it terminates the company’s title to the property.

What happens now?

In the recent case in the High Court, Re Fivestar Properties Ltd [2015] EWHC 2782 (Ch), the Court found that the company’s freehold interest in property can survive a  company’s dissolution so that the property reverts back to the company once the company is restored to the register. In such a situation, if the Crown has not disposed of the property, it will be treated as if it had belonged to the company and had never been disclaimed by the Crown.

The High Court followed a decision from a previous case, Allied Dunbar Assurance plc v Fowle and others [1994] BCC 422, where it was concluded that the leasehold interest is revived when the previously dissolved company is restored, despite its being disclaimed by the Crown following the company’s dissolution. It would therefore appear that both freehold and leasehold properties are affected by the same rules.

So, how does this affect a purchaser of such a property?

Fivestar, Allied Dunbar and ELB Securities, a recent Scottish case relating to leasehold property, all agreed on the view that a Crown disclaimer is not a disposition within the meaning of section 1034 of the CA 2006. This means that purchasers of previously disclaimed properties from the Crown Estate will not be protected under section 1034 CA 2006 (which states that the restoration of a company will not affect the title of the subsequent purchaser of that property), and therefore the new purchaser’s title may be affected by such restoration.

Will the title to the property contain any ‘warning’ notices?

A prospective purchaser may be warned of the position by the presence on the property register of a note (not a notice) under Rule 173 of the Land Registration Rules 2003, but that Rule says only that the Registrar “may”, not “must”, enter such a note. That wording may preclude any claim for Land Registry compensation arising from the absence of such a note.

What about if a purchaser buys from a lender?

This decision is of limited relevance lenders who wish to sell charged property that has been disclaimed by the Crown. Their security interest, unlike that of the borrowers, is not terminated by the disclaimer, and they still have power to sell the property and vest freehold title in the purchaser.  For the avoidance of any doubt a prudent purchaser would doubtless wish the vesting of title in him to be confirmed by requiring the lender to obtain an Order from the Court under section 1017 CA 2006 (Power of court to make vesting order for disclaimed property) or section 181 of the Law of Property Act 1925 (Power of court to create a legal estate and vest it in a person who would have been entitled to an estate that terminates due to a corporation’s dissolution).

If you would like to discuss this further, then please contact Lily Meyer of Morrisons Solicitors Commercial Property Team in Wimbledon on 020 8614 4590 or by e-mail on [email protected].


Although correct at the time of publication, the contents of this newsletter/blog are intended for general information purposes only and shall not be deemed to be, or constitute, legal advice. We cannot accept responsibility for any loss as a result of acts or omissions taken in respect of this article. Please contact us for the latest legal position.

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