One Strike and You're Out?

“I am a Commercial Landlord and I have found out that my Tenant has been struck off the register, what happens next?”

A company can be struck off the Register of Companies for a number of reasons. While some companies have fallen foul of the statutory requirements for filing its returns in time resulting in a compulsory strike-off, others have been voluntarily dissolved where trade is no longer commercially viable.

With many commercial premises in the UK being let out to tenant companies, this can often mean that a commercial landlord is left in a tricky position.

What is the position where a tenant company is struck off the Register at Companies House?

Where a company is struck off or otherwise removed from the Register, it may be assumed that the lease is immediately brought to an end and the commercial landlord has free reign to grant a new lease. However, this is not quite the case.

Once a company is struck off the Register, the tenant company will cease to exist. Under the Companies Act, all of the tenant company’s interests, including its interest as the tenant of the lease, will become bona vacantia (ownerless) and escheats (reverts) to the Crown.

If the Company’s interest as the tenant of the property is not properly dealt with before it is struck off the Register of Companies, then it will be for the Government Legal Department (formerly the Treasury Solicitor’s Department) to deal with on behalf of the Crown.

Usually, the Department will make a decision to either assign or disclaim the lease.

Grant of a New Lease/Sale of the Freehold Property                                

The proper termination of the company tenant’s lease where it has been struck off from the Register of Companies is of vital importance. If you are selling your commercial property, the buyer will insist on a clean title. If you are buying, you will not want a dissolved company later interfering with your plans for the property.

Third Parties and Charged Leasehold Property

Sometimes, the dissolved company will have charged their interest in the property to a third party, for example, a lender or local authority. Interestingly, even where the lease has been disclaimed, it will not end the rights (and obligations) that a third party has under that lease and the third party might be entitled to apply to the court for a vesting order.

Restoration

A final point to bear in mind is that there is a possibility of a party applying to the court for an order to restore the company to the register of companies, i.e. bring the company back to life.

If this happens, the company will be deemed to have continued in existence as if it had not been dissolved or struck off the register at all.

This raises an obvious concern for the commercial landlord – after all, that tenant company will still be treated as a party to the lease, and as if the lease was never disclaimed. For a commercial landlord who has not forfeited the original lease, and instead granted a new lease, this exposes the landlord to potential litigation. 

In the relatively recent case of Mistral Asset Finance Limited v (1) The Registrar of Companies and (2) Her. Majesty's Attorney General [2020] EWHC3027 (Ch) the court considered the position. It noted that where, following a company’s dissolution, its property is disclaimed by the Crown, and then reinvested into the company following its later restoration, the disclaimed property will survive and be subject to any third-party rights that existed before its dissolution.

Applying this principle to commercial landlords, the decision demonstrates that when a company is restored to the Register, it should regain any of its leasehold property which was initially vested and then disclaimed by the Crown.

Only when the Government Legal Department sells on/assigns the lease, instead of disclaiming it, will this prevent a company from having its leasehold property returned to it on restoration.

Insolvency issues relating to commercial property are extremely complex. Should you require any assistance with the sale, purchase, leases, charges, registrations, options or any other commercial property matters, contact a member of the Commercial Property Team on 03333 208 644 or email law@jcpsolicitors.co.uk