Long live our new King, long may he reign (over your property)

Aside from the £330m the Guardian has estimated King Charles owns in private property, did you know the Crown could ultimately take ownership of your property?

In certain circumstances property (whether commercial or residential) can pass back into the hands of the Crown. In the case of property based in Cornwall or Lancashire or property owned anywhere by a company whose registered office is in Cornwall or Lancashire, that property can pass back to the Duchy of Cornwall or Lancaster respectively.

Why is this? Well, Bona Vacantia forms part of the historical principle that all land is legally owned in its entirety by the Crown. All property ownership rights are in fact a grant out of the Crown’s ultimate right of land ownership and these granted rights are all capable of coming to an end. In rare but certain circumstances, the principle of Bona Vacantia aids the transition of property being returned to its original land grantor, the Crown. 

Ownerless goods

Bona Vacantia translates to “ownerless goods” or “vacant goods”. Once a property is deemed ownerless the mechanisms that underpin the principle of Bona Vacantia allow for property to return to the Crown in one of the following circumstances:

1. Dying Intestate (without a will): If a property owner dies intestate and there are no heirs apparent, that person’s property passes back to the Crown.
    
2. A UK registered Company (limited by shares) is dissolved: Where a UK Company is dissolved by liquidation or by being struck off any property owned by that company, passes back to the Crown. Where the company has not been struck off by the registrar and is instead dissolved by way of voluntary striking off or liquidation, the returning of the company’s property to the Crown is usually owing to the fact that the company or the liquidator has not sold off the property before either process finalises.  
    
3. Failed Trust: In some circumstances, property that is the subject of a failed trust passes back to the Crown.

What can the Crown do with your property?

Once the property passes back to the Crown (or Duchy) under Bona Vacantia the property then legally passes in ownership to the Treasury Solicitor (or Duchy’s representative). The Treasury solicitor acts on behalf of the Crown and whilst there is no particular prescribed way of dealing with property once it belongs legally to the Crown, often property will either be sold for full market price or “disclaimed”.

There are obvious benefits to selling a property at full market price, but why might the Crown choose to disclaim a property and what does it mean? Well, here the property is treated as if it had never legally reverted back to the Crown under the principle of Bona Vacantia. Instead, the property passes to the Crown under the separate principle of Escheat. Unlike Bona Vacantia the principle of Escheat allows for property to revert to the Crown without the rights or liabilities of the dissolved company in the property (although it does not extinguish or impact the liabilities or rights of any other person).  The Crown, therefore, may choose to disclaim a property where there are certain risks associated with it, for example, where the property is low in value or has negative equity. Disclaiming under Bona Vacantia can be a cost-effective way for the Crown to deal with certain problematic properties.

In cases where properties are secured by way of a charge then it is highly likely that the Crown will exercise its right to disclaim the property and allow for the particular lender who secured their charge against the property to make use of its power of sale under the charge. However, if for whatever reason the Crown decides not to disclaim the property, the property would be sold at market value subject to any charges.

In this unstable economic landscape is this an issue?

Owing to recent trends of rising energy costs, lack of staff and increasing inflation many UK companies are struggling to continue business as normal. In 2022 a record number of companies were dissolved and with the economic landscape not looking like it will get better any time soon, 2023 could also be another difficult year for companies.

The Coronation is perhaps a reminder that companies should think ahead as to what may happen to their property when times get tough. If struggling companies are not careful and are either struck off by the registrar or fail to deal with their property before being dissolved, they could end up losing their property assets to the Crown.

Can you get your property back?

In the case of individuals who die intestate, the Treasury Solicitor keeps a list of unclaimed estates. (there were 6418 unclaimed estates on 3^rd  May 2023 for example). Entitled individuals  can then make a claim to retrieve the property.

In the case of dissolved UK companies, there are different options available to interested parties. One option is for the company to be restored to the register of companies. This effectively means that it is treated as never having been dissolved and will automatically regain its original rights of ownership over any property that passed back to the Crown under Bona Vacantia. Similarly, certain property that was originally disclaimed and returned to the Crown under the principle of Escheat, would automatically pass back to the company.

In cases where a dissolved company has been restored but the property has already been sold under Bona Vacantia the company will be entitled to any consideration received by the Crown for the sale of the property.

Where restoration has not been possible and where a company has been dissolved, in certain circumstances interested parties can apply for a vesting order to allow for the property to be legally transferred in ownership to the interested applicant. It may be the case that none of the above options are available to the company or interested party and so the property would need to be purchased from the Crown for market value.

Are there any preventative measures you can take?

In the case of individuals, the principle of Bona Vacantia means it is important to take steps to draw up a will.

In the case of companies, the registrar will strike off a company where there is no evidence of business as usual (e.g. making the necessary Companies House filings). It is essential, therefore, that to keep filings up-to-date. Alternatively, in cases where the company is being voluntarily struck off or is entering into liquidation, it is imperative that all assets are accounted for before either process concludes.

This article was first published in PrimeResi on 5 May 2023.

FURTHER INFORMATION

If you have any questions about any of the real estate issues covered in this blog, please contact Jessica Rice or any member of the Real Estate team

ABOUT THE AUTHOR

Jessica Rice is an associate in Kingsley Napley's Real Estate and Construction team. Jess joined Kingsley Napley in September 2019. Prior to commencing her training contract at Kingsley Napley, Jess was a paralegal in the firm's Corporate and Commercial team for just over a year. She subsequently completed her training contract with Kingsley Napley and qualified as a solicitor in September 2022.