Bishop & Sewell

This article is concerned with the options available to leaseholders where the landlord or freeholder is a company that has been dissolved and removed from the register of companies at Companies House.

Leasehold flats will always have a landlord, in most cases the freeholder, who usually has ultimate responsibility for ensuring the building the flat is kept in, is in a good state of repair and will covenant to repair, maintain and insure the building, as well as enforcing the terms of covenants against other leaseholders in the building.

Where the landlord is a company and that company has been dissolved, those covenants will not be complied with which may have a detrimental effect on the building. It is likely to affect the leaseholder’s ability to be able to deal with the property and may have an impact upon the value of the property or the persons who may be able to actually buy the flat.

Neither the Leasehold Reform Housing and Urban Development Act 1993 or the Landlord and Tenant Act 1987 apply where a company has been dissolved and struck off the register of companies at Companies House.

Dissolved freehold company:

Where the freeholder is a company that has been dissolved and struck off the register of companies held by companies house, the procedure is entirely different to that where the landlord is an individual and missing. When a company is struck off the register of companies, the property becomes ownerless and, by law, passes to the Crown. The Treasury Solicitor acts for the Crown to collect the assets of dissolved companies in England and Wales. The treasury solicitor will usually disclaim its interest in the land (usually where there is a potential liability to the Crown) or sell the interest for full market value.

Freehold property - terraced houses

It is not unusual for companies to be dissolved for administrative irregularities, such as failing to file accounts or an annual return and in some circumstances, it is possible for the company to be restored onto the register if an application is made within 6 years of dissolution. In such a case, the company will retake possession of the interest and will then be in a position to be able to deal with the asset again. In these circumstances, the leaseholders of the reinstated company will be able to acquire the freehold by either following the statutory procedure as set out in the 1993 Act or, by agreement with the company outside of the act.

If the company is not reinstated and the treasury solicitor has not disclaimed its interest, the leaseholders can apply to the treasury Solicitor to acquire the interest from the Crown but this will be at market value which will be calculated by a valuer appointed by the treasury Solicitors.

Where the Treasury Solicitor has disclaimed its interest in a building it is frequently exercised because it protects the Crown from liability. Where the Treasury Solicitor disclaims its interest in land the title to the land is extinguished (although it will usually show at the Land registry albeit with a notice of disclaimer registered against the title).

If the interest has been disclaimed, the freehold is no longer the property of the dissolved company and the disclaimer destroys the legal estate in land so the land ceases to be owned by anyone and is held by the Crown in demesne. It does not become part of the Crown Estate unless it completes the escheat by taking steps to exert rights as owner whereby it takes steps to dispose of the interest. The principle of escheat has its origin in feudalism (as do the principles of leasehold and freehold property ownership).

Where the property is held by the Treasury Solicitor or under the principle of escheat, no positive steps shall be taken in respect of the building: it will not deal with management or insurance issues and it will not grant any lease extensions.

In such situations the only real option for leaseholders of such property is for the leaseholders to apply to acquire the property. This will involve the purchase of the property for market value, any purchase will be subject to any third-party rights that exist and no title guarantee will be given on sale. A new title number and interest in land will usually be created on purchase.

There are no statutory rights to acquire the freehold to a building where the company has been dissolved that can be exercised in a similar way to the principles set down in either the 1987 Act or the 1993 Act but there is the opportunity to apply to the Treasury Solicitor or the Crown to acquire the interests.

In both cases the statutory body will dispose of the interest to the leaseholders at market value calculated by a surveyor appointed by the Crown subject to the leaseholders demonstrating that all or at least a majority of tenants in the building want to acquire the interest in land. The leaseholders will be responsible for the professional fees associated with the disposal including those the valuation fees and any legal costs.

A surprising number of tenant owned freehold companies allow the companies to be struck off the register. Where the company directors apply to reinstate the company within 6 years of dissolution, there will be fees to be paid to reinstate the company. Where more than 6 years have passed since dissolution, the tenants will have lost the opportunity to reinstate the company and will be faced with having to pay for the freehold interest again. If the leases have not been extended prior to the dissolution, the premium has the potential to be substantial.

Next Steps
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Category: News | Date: 6th Mar 2020

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