Unable to Remove Charge on Empty Property by Dissolved Company

Hello,

I've got a bit of a complex case and would appreciate any advice / comments. Apologies as the background is a little long winded – (There is a brief summary at the end):

The property was owned by a lady who passed away in 2015 and the eldest of three daughters was appointed to administer the estate. The late mother was not very good with money and back in 1992 unbeknownst to the daughters, she had taken a secured loan with a charge on the property, of £12,300 from a company called London & Counties Mortgages (at 30.0% APR over 25 years!?), so was paying around £240 per month (with a total amount owing of  around £72,000).

The payments were made each month via a bank paying in book supplied by the Lender, up until 2008 when the lender failed to send out a new book. The mother was not chased for payments and had no idea on how to keep making further payments and so didn't take any further action, having already paid approx. £46,000 in respect of the loan. As it turns out, the Lender was dissolved shortly after.

After she passed away in 2015, the daughters became aware of all of this, and are now unable to sell the property as the Charge from the Lender is still registered against the property. They're paying and increased rate of council tax, insurance etc. and are desperate to be rid of the property.

They sought legal advice and spent around £3000 on 'specialist solicitors' who tried to trace any creditors for whom the remaining moneys may now be owed but after 6 months, came up with next to nothing. I then made contact to discuss the long term empty status of the property and became aware of all of the above.

As the dissolution notice states, "Upon dissolution, all property rights vested in, or held in trust for, the company are deemed to be Bona Vacantia, and accordingly will belong to the crown." - So we then made an application to the Government’s Bona Vacantia Division (BVD) to repay the remainder of the charge, and their response having reviewed our application was that they were not going to chase the remainder of the debt and were happy to declare that there was "no beneficial asset arising from the charge registered on the title, and hence no Bona Vacantia interest vested in the Crown". and that they were "therefore not in a position to either object or consent to an application made to HM Land Reg for an order to remove the charge" and advised us to include a copy of their response in our application to Land Reg to remove the charge.

We then applied to the Land Reg and after many weeks of sending in various information and statutory declarations from all of the daughter etc. the Land Reg solicitors responded to say that they could not remove the charge, without a requisite DS1 form signed on or behalf of the BVD.

I am now awaiting a response from BVD but our fear is that they will not likely consent to this as detailed in their original response...

My question is then, where do we turn next?

In summary:

  • There is a Charge registered against the property and so the daughter cannot sell it.
  • The Lender is dissolved and no resulting creditor can be found.
  • The dissolution notice states the moneys should now become owed to the Crown / BVD.
  • BVD declare no beneficial interest and won't consent or object to any Land Reg application to remove the charge. 
  • Land Reg will not remove the charge without a DS1 from BVD
  • The daughters are happy to repay the charge but no creditor can be found, and Land Reg / BVD seem to be in deadlock...

    Any ideas, suggestions or questions are very welcome!
    Many thanks in advance,

     

    Scott Tunnicliffe, Plymouth City Council

    scott.tunnicliffe@plymouth.gov.uk || 01752 307661

 

Forums: 
miscellaneous issues

Hi Scott

It looks as though BVD is the only party able to release the charge. Once they hear that the Land Registry is insisting on a DS1 then perhaps they will feel able to complete one. So I wouldn't write that possibility off completely. 

The DS1 has to be executed as a deed. You/your client could offer to pay any legal costs involved. That might help.

Another alternative - someone else will be more expert than me on how or whether this could work - might be a negotiated/unopposed enforced sale on the back of a council debt (it your clients stop paying council tax).  That would leave the council needing to know what to do with the portion of the value which would seem to be represented by this loan. On the back of the BVD corrrespondence the council might considere there was nothing to disburse.

Finally, it might be possible to persuade BV to accept it does have an asset and to ask them to sell it to the council at a peppercorn (or whatever). I am not sure of the process of transferring a secured loan from one entity to another but no doubt it exists.

One would certainly  expect BVD to be helpful once they realise that there is an obstacle to the case being resolved: I should not give up hope as yet BV have seemed to want to be helpful by writing off the loan in the first place. It's just that they haven't done it in a way that satisfies the Land Registry. 

If this does get stuck then we (EHN) can make representations as it would suggest that the Land Registry/BV procedure doesn't work - something is falling between two stools. The local MP might be induced to take an interest. 

Good luck.

David Gibbens, Policy Lead, EHN

Hi Scott

Apologies for the delay in responding.

Building on David comments - there are several approaches that can be taken to resolve the position.

I am assuming that the Land is registered with the land Registry and that the mother owned the property, the daughters have secured probate and have or are intending to put the property into the correct legal ownership ie beneficiaries name.

Option 1

Looking at Companies House - London & Counties Mortgages, the Company was dissolved 24th April 2012, there are 2 Directors (one Director acting as Secretary). One based in Switzerland the other in London (who is a Solicitor).

There is an ability for the Company to resurrect itself within a certain period of time. As a general rule restoration by court order can be applied for up to six years from the date of dissolution, if the dissolution date is on or after 1 October 2009.

Once a company has been dissolved or struck off the register action is needed to restore it either by an application for administrative restoration (available only to the former directors or members) made to the Registrar of Companies or by an application to court

Companies dissolved under section 1000 or section 1003 of the 2006 Act and section 652 or section 652a of the 1985 Act.

Therefore, you could contact the Directors directly and confirm there is an asset available but they need to resurrect the Company to realise it. The reality is that the level of the charge is likely to be very small in relation to the overall position of the Company and will be insufficient to encourage them to take this action.

Option 2

You can use the enforced sales procedure as a method to clean the title. I have done this a number of times where it is to the advantage of the Legal owner and they are willing to work with the LA. Assuming that your Solicitor is willing to play ball.

I am inferring from your post that the daughters want to sell the property.

Therefore , if you create a debt under a suitable piece of legislation such as

  • Building Act 1984 / Prevention of Damage by Pests Act 1949
  • HA 2004 / EPA 1990
    Often the garden is over grown and there may be rubbish on site. You can serve a section 4 PDPA 1949 notice, do works in default then proceed to an enforced sale.

Do not use Section 29 LG(MP)ACT 1982, Section 215 T&CP Act 1990 or pursue a Council Tax debt as the legislation / caselaw prevents the charge created from taking priority and only binds the offending party. Section 29 can only be recovered via county Court and has no priority.

Consequently, you create the debt and then provide three months’ notice under the Law & Property Act 1925, you can sell the property at auction as you are under a duty to obtain best price.

The new owner should obtain absolute title on the basis that the charges binds all estate and interest and takes priority (Legislation or case law supports this).

The issue is then what you do with the funds?

Clearly the LA can take out (cost of works, Solicitor, Auctioneer  and surveyor’s fees), then the rest of the money should be paid directly to the next chargee. Once their charge has been satisfied  the excess funds should be paid to the previous owner or personal representative of the estate (Grant of Probate)

The whole procedure relating to the enforced sales procedure works on the basis that the statutory notices have been served correctly and that you have proof of good service etc. So you need to get this right.

In this case as the Company is dissolved then the benefit of the charge vests in the Treasury Solicitor.

However, you may find that their approach will be completely different where you are offering them cash rather than the benefit of a charge. They may well become more engaged.

Alternatively, if you can satisfy yourself through the paperwork provided from the family as to what the full liability of the charge was at the time of the sale. Then you could take the practical approach of keeping this level of funds from the sale and paying the rest to the legal owner of the property.

Then the LA would keep this money in perpetuity for the relevant party that has the benefit of the charge, if you cannot convince the Treasury Solicitor to take it  then these funds could be paid into Court.

But in the round you have moved the property on and will hopefully bring it back into use.

Option 3

If the family (estate) are prepared to play the long game, then there may be a major financial benefit to them taking the following approach:

They can still sort the ownership of the property and take legal ownership in line with probate / will etc.

If the property is in poor condition then you could with their consent (perhaps) serve the appropriate Housing Act 2004 notices or others to resolve the condition of the property and undertake works in defaults.

These would be a statutory charge and would take priority over any existing mortgage / charge.

So if the wheels fell off the bus, the LA would get their money back.

The family could rent the property out and use the rent to repay the LA until such time as the debt has been repaid or the appropriate time period has lapsed and sale of the property could proceed.

The company was dissolved in 2008 and although it had a legal charge secured against the property  (I am assuming – not a charging order). It could be argued that the Limitation Act 1980 applies.

If they failed to collect any monies for 12 years (2008+ 12 years =2020), then they may be able to argue that its title is extinguished.

Many mortgagees will have recently been concerned to find limitation loopholes in their standard procedures because where the mortgagor had been in possession of the mortgaged property for 12 years without any payment or acknowledgement of the mortgage debt, the mortgagee’s right to possession of the land was held barred under s.15 and its title to the mortgaged property was also extinguished by section 17(Natwest v Ashe [2008] EWCA Civ 55,)

In contrast to the position of mortgagees, judgment creditors with charging orders will have been relieved to find that section 20(1) of the Limitation Act has been held to have no application to charging orders so a creditor who obtains a charging order can rely on that charge more than 12 years later  Yorkshire Bank Finance Ltd v M ulhall [2008] EWCA Civ 1156

Consequently, you could make an application to the Land Registry at that stage on the basis that section 17 Limitation Act 1980 extinguishes their title.

So there are a couple of options available that may be able to resolve the matter for you.

As always the above information is for guidance only and it is a matter for your own Solicitors to advise you in relation to any approach taken and possible  legal consequence.

Regards

Andrew Lavender

Housing Training and Consultancy Ltd

www.htlc.co.uk