Many flats are marketing as having the benefit of ‘share of freehold’. Whilst this comes with a number of positive benefits for leaseholders it also comes with a number of legal responsibilities and potential pitfalls for the unwary.
In this case Stuart Wright acted for two of the leaseholders of a block of converted flats. The freehold was owned by a share of freehold company. Unknown to his clients one of the other leaseholders, who was the director of that company, failed to comply with company legislation and the company was struck off the register and dissolved almost a decade ago. The result of the dissolution was that, pursuant to s. 1012 of the Companies Act 2006, the freehold interest vested ‘bona vacantia’ in the Crown.
For many years matters remained in a state of ‘limbo’, with no-one taking responsibility for repairs and maintenance of the block. Consequently there was serious deterioration of the building. His clients, who were buy to let investors, only became aware of the full extent of the problems when the local authority served notice on them concerning the serious disrepair.
Whilst it would normally be possible to take the legal steps necessary to restore a share of freehold company to the register and ultimately resolve the issues, no such action had been taken and the time for doing so had expired before his clients approached their solicitors for advice.
Once the Crown were made aware that the freehold vested bona vacantia the Treasury Solicitor disclaimed the interest in the freehold (pursuant to s.1013 of the Companies Act 2006). Consequently the freehold became subject to escheat to the Crown at common law. This is an area which the Crown Estate’s solicitors describe as a “complex and arcane area of our property and constitutional law”. Following Stuart Wright’s specialist advice his clients successfully applied to the High Court and secured a vesting order pursuant to s. 1017 of the Companies Act 2006 on terms which effectively restored the original status quo, being an important step towards resolving the problems they faced.