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Bona Vacantia And Escheat

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Jasmine Keeble, Commercial Property | 13th December 2022

What Happens To Property When A Company Is Dissolved

If a company owns land or property at the point it is dissolved, ownership of the land or property does not pass to its directors or shareholders but passes to the Crown.

This principle is referred to as Bona Vacantia which translates as ‘ownerless goods’.

If the company is restored at a later date, then the property may revert back to it. This is provided it has not yet been disposed of by the Crown.  

Escheated Property:

Once a property becomes Bona Vacantia, the Crown may choose to disclaim or renounce its interest in it.

Under the legal system in England, Wales and Northern Ireland the monarch owns the superior interest in all land. This is usually irrelevant, however once Bona Vacantia freehold property or land is disclaimed, it then falls to the monarch. The property is then said to have ‘escheated’ and the Crown Estate becomes entitled, but not obliged, to possess it.

The registered freehold title will remain the same. However, notice may be entered on the title to confirm the property has been disclaimed. It should be noted however that Land Registry are not obligated to do this.

Once property has been escheated to the Crown the whole of the land may be sold to a suitable buyer.

How To Purchase Escheated Property:

If someone wishes to buy escheated property, they will need to approach either the Crown Estate or their conveyancers to confirm whether they are a suitable buyer

The Crown Estate will only agree to sell escheated property in certain limited circumstances:

  • If it thinks the sale will not create a risk to the Crown Estate or its reputation.
  • If it is sold to a buyer who it believes has a genuine interest in the future use or condition of the land or who had an interest in the former owner.
  • For the best price that is fair and reasonable in all circumstances- usually market value.
  • As the Crown Estate accounts to the Treasury, any buyer will be required to contribute in part or whole to the legal costs incurred by the Crown Estate.

The land will only be sold as a whole in one transaction. This is because selling part of it could be deemed to constitute an act of management regarding the remainder. This would require the Crown Estate to bring the property fully into their possession and maintain and look after it.

It should be noted that any sale of escheated land will remain subject to any mortgages, legal charges or other encumbrances which may exist against the former owner’s freehold interest.

Once the interested party has been accepted as a suitable buyer, the matter proceeds in the usual manner. The Crown Estate will be the Transferor. 

Pitfalls to be aware of:

If you still retain an interest in the land, you may be able to apply for a vesting order. This is an order granted by the Courts to claim that the property is not Bona Vacantia and should not be in the Crown’s possession. For example, a former director of the dissolved company can apply for a vesting order.

This process can occur even if the land has been escheated to the Crown Estate, however it may be opposed by the Crown and the courts if the property is deemed to still have significant market value.

Restoring property to a company which has been dissolved can be very costly and time-intensive. Steps should be taken to mitigate the risk of the property becoming Bona Vacantia:

  • If you currently own a company which you are intending to dissolve, you should ensure that any property owned in that company has been sold or transferred out to another party.
  • You should also wait to confirm that any transfers have been registered before dissolving the company. HM Land Registry have been experiencing significant ongoing delays with registrations and if registration is prevented after the company is dissolved, the property may still become Bona Vacantia and the above processes may occur.

If you have any questions regarding Bona Vacantia and Escheat please contact a member of our Commercial Property team.