Bona Vacantia


Our team: Gavin Whitney


Bone up on Bona Vacantia

Introduction

It is a well-known fact that lawyers love to use a bit of Latin now and again; it makes us feel clever and superior!  To clients, the use of Latin perhaps implies that something is quaint and old-fashioned and of no interest to them. That may be the case sometimes, but bona vacantia can affect clients who own companies, and it’s important that they understand a little bit about it.

Ownerless property

Under English law, all property must have an owner.  Usually that is not an issue as people do not often “lose” their property.  But sometimes, property can become intentionally or unintentionally ownerless, including real estate assets.

Property owned by companies

If a company ceases to exist, any property to which it is beneficially entitled (i.e. where it holds more than just the bare legal estate) passes to the Crown as the ultimate owner of all property in England and Wales.  The process by which it does this is known as bona vacantia.  The property is then either dealt with by the Crown (via the Treasury Solicitor), or by the Duchies of Lancaster and Cornwall (in the case of areas of the country where those Duchies are responsible for such matters and the registered office of the company is located in those areas).  The Crown does not inherit the liabilities of the company on dissolution though.

A company could cease to exist for a number of reasons, some intentional and some not.  The company could be struck off the register for failing to make its required filings at Companies House; a company might be wound up without all its property being disposed of; or a liquidator might disclaim onerous property owned by a company.

It can sometimes be the case that a company may “forget” it owns a piece of land, perhaps because it is of no value or because of poor record-keeping.

Crown options

The Crown has two choices as to what to do with property that comes to it bona vacantia: it can sell it or disclaim title.  If it disclaims title and the property is freehold land then the property passes to the Crown Estate (or to the Duchies of Lancaster and Cornwall) by a process called escheat.  Once that has happened, the solicitors acting for the Crown Estate (or the Duchies) deal with it.

It is worth pointing out though that if a foreign company is struck off, its freehold land will escheat straight to the Crown Estate.

How then do the directors of that (now dissolved) company deal with any property formerly owned by the company?

Restoring a company

If escheat takes place, then things will likely get more complicated for the directors of the company.  However, if they can restore the company to the register before that happens then the law provides a very neat solution: the company is deemed to have continued in existence and any property will automatically vest back in it again with no need for any further paperwork. It is possible this may also apply to land that has escheated to the Crown Estate, but the law is not clear on this point.  If however the land has been disposed of by the Crown, then restoration of the company will not unwind that transaction.

There are other options for dealing with the situation, but this is the most straightforward.

Practical steps

There are a few things that directors can do to ensure that they do not come a cropper in relation to bona vacantia:

  1. Keep up with their Companies House filings.
  2. Maintain their records of property owned by the company.
  3. Consult with a solicitor before winding up a company so that searches of the Land Registry can be carried out to check for any registered land.

However, if an inadvertent example of bona vacantia of land does occur, then the first course of action is to speak to a solicitor to advise on how to get it back.  Fladgate LLP would be delighted to assist with this process.

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