Bona Vacantia, Escheat and Lulham v Crown Estate Commissioners – What happens when a freehold disappears?

In this edition of Lay of the Land, David Nuttall reviews what happens when a freehold estate becomes ownerless citing the case of Lulham v Crown Estate Commissioners as a practical application.

We all know that leases can be determined. When the lease is brought to an end, the leasehold estate in the land is destroyed. It’s an easy concept to understand, because there is always a person in the background for the land to revert to (the reversioner, IE the landlord). 

On the other hand, it’s odd to think about a freehold being determined. There is no reversioner – the freeholder is the last person in the chain, with all rights of absolute owner.  

Both freeholds and leaseholds are estates in land. They are not absolute ownership, but a bundle of rights. Estates can be determined. When that happens to a freehold, the land returns to its ultimate owner – the Crown.  

When this happens, we are seeing history in action. During the high medieval period, freeholds were granted by the Crown and, in certain circumstances, taken away. The ancient writ of escheat was a mechanism by which the interests of estate holders could be determined by the Crown.

As time passed, freehold interests became less precarious, and in modern times they are broadly indistinguishable from absolute ownership. However, there are a few situations, such as when companies dissolve, which can cause freehold estates to disappear.

This can be a convoluted area, and particularly so where attempts are made to acquire the property back from the Crown. This note summarises different scenarios where freehold property becomes ownerless, and the routes which can be taken to regain – or recreate – the freehold. I will also consider a helpful recent example, Lulham v Crown Estate Commissioners [2025] EWHC 1572 (Ch), to illustrate the relevant legislation being (unsuccessfully) used.

Freeholds On Company Insolvency – Standard Situations

There are three common situations to consider:

• When a company dissolves, and the property is not then disclaimed; 
• When a company dissolves, and the property is disclaimed;
• When a company is in liquidation, and the liquidator disclaims property.

Company Dissolves, Property Not Disclaimed

When a company dissolves, it ceases to exist as a legal entity. Any freehold property it owned is therefore left without an owner.  However, the freehold estate itself continues – nothing has happened to make it disappear.  

As such, any freehold property, along with any other property and rights it continues to hold at the time of dissolution, are deemed “bona vacantia” and “belong to the Crown” – s1012 Companies Act 2006 [“CA 06”].

This means that the freehold estate vests in the Crown, and is dealt with by the Treasury Solicitor. Any subordinate interests – leases, securities etc – will continue as before. The identity of the freeholder has simply changed.  

Generally speaking, once the Treasury Solicitor becomes aware that the Crown is holding property in this way, it will simply sell the property or disclaim it, as to which, see below.

Whilst a freehold estate is being held bona vacantia, there is not a great deal that any interested party can do, beyond purchasing it.  The main solution would be to attempt to restore the company, assuming the application is within time. Restoration would re-vest the freehold in the company, unless the Crown has already disposed of it.

In circumstances where the freehold was held by the company on trust when it vested in the Crown, the Court would have power under s44 Trustee Act 1925 to vest the company’s interest in a new trustee.

Company Dissolves, Property Is Disclaimed

The Treasury Solicitor is not bound to hold onto the freehold. It has the power to disclaim it under s1013 CA 06. The Treasury Solicitor must follow various procedural and timing requirements set out in that section, but otherwise there is no restriction on what can be disclaimed. 

The effect of the disclaimer is set out at s1015 CA 06. The disclaimer terminates the company’s rights, interests and liabilities in the disclaimed property. This means that the freehold estate is terminated, rather than simply transferred or vested. As there is no longer a freehold estate in the land, it reverts (or “escheats”) to its ultimate owner – the Crown.

This creates complications where there are any third party interest-holders, such as lessees or chargees. S1015 CA 06 however preserves the common law position, which is that escheat does not affect the rights or liabilities of third parties. The rights granted under lease will still therefore exist.  

Once the freehold has been disclaimed, third parties have several options if they wish to recreate the freehold. These are under a couple of separate mechanisms, as follows:

• If a person has an interest in the disclaimed property, such that they are entitled to it, the Court may vest the freehold in that person (s1017(1)(a) & (2)(a) CA 06 – referred to as s1017 Limb One);

• If a person is under a liability in respect of the disclaimed property, the Court may vest the freehold in that person – providing that it appears that the vesting order would be just for the purpose of compensating the person subject to the liability (s1017(1)(b), (2)(b) &(3) – referred to as s1017 Limb Two);

• If a person had an entitlement to an estate which has been determined, the Court may create a corresponding estate and vest it in the person with that entitlement – (s181 Law of Property Act 1925) 

Further, as with bona vacantia cases, a third party may seek to restore the company, or apply for a vesting order under s44 Trustee Act 1925.

Company Is In Liquidation, Liquidator Disclaims

When a company is in liquidation, the liquidator is under an obligation to collect the company’s assets, realise them, and distribute them.  Some of the company’s property may constitute a liability, in which case the liquidator has the power to disclaim it.  

This is under s178 Insolvency Act 1986, and is available where property is onerous. This would include any freehold property which is:

…not readily saleable or is such that it may give rise to a liability to pay money or perform any other onerous act 

An example would be a piece of property which is heavily burdened by easements or covenants, or some situations where the property has been let on a long lease at a nominal rent. Note that this is more restrictive than with Crown disclaimer.

As with Crown disclaimer, the effect of liquidator disclaimer is to determine the “rights, interests and liabilities of the company in or in respect of the property disclaimed” – s178(4)(a) IA 86.

As the company’s interest in the property is a freehold estate, that freehold is determined. The property therefore escheats to the Crown’s absolute ownership.

Again, in like terms to Crown disclaimer, liquidator disclaimer does not affect the rights or liabilities of any other person, except insofar as necessary to release the company from its liabilities. This means that leases granted out of the company’s freehold continue in a sort of twilight state, without a reversioner.

The mechanism for re-creating and re-vesting the freehold is essentially identical to that with Crown disclaimer, although using different legislation.  Here the applicant would rely on s181 Insolvency Act 1986.  The applicant would need to fulfil the requirements of either s1017 CA 06 Limb One or s1017 CA 06 Limb Two. Unlike s1017 CA 06, an applicant under s181 IA 86 must act quickly – any application must be made within three months of the applicant become aware of the disclaimer (rule 19.11 Insolvency Rules 2016).

S181 LPA 1925 and s44 Trustee Act 1925 would also be available to applicants following liquidator disclaimer.

Lulham v Crown Estate Commissioners – Practical Application 

This was a vesting order application, and is an example of application of the legislation being practically applied.

Here, the Claimants were sole shareholders of a company, Matchmount Ltd. The Crown took no part in the Claim.

Matchmount purchased a residential property [“the Property”]. It was split into flats. Flat 1 was let to C1.  Flat 2 was let to C1 and C2 jointly.

On 2 Feb 2010 Matchmount was wound up compulsorily. Cs were unaware. The deadline for restoration expired.

The freehold to the Property vested in the Crown bona vacantia when Matchmount dissolved.  

Subsequently, the Treasury Solicitor disclaimed the freehold and the Property passed to the Crown by escheat.

The Claimants sought to vest the freehold of the Property in themselves on the three bases set out above – both limbs of s1017 CA 06 and s181 LPA 25.

Vesting the freehold in the Claimants may have made sense. They were the sole shareholders of the Company, could have transferred the freehold to themselves when the Company still existed, and would be thoroughly mucked about by the freehold no longer existing.

However, the requirements for a vesting order are strict.

In respect of s1017 Limb One, the Claimants raised two arguments.  First, by being the shareholders of the former freeholder, they personally had a sufficient interest in the Property.

Second, they argued that they held an interest in the Property by virtue of their rights under the leases – specifically, they had the benefit of the landlords (IE, freeholder’s) covenants.

In respect of s1017 Limb Two, the Claimants argued that they owed liabilities under the terms of their leases, and remained under obligations to perform the lessee’s covenants.

In respect of s181 LPA 25, the Claimants argued that they were “entitled” to the freehold, because they would have been able to compel Matchmount to transfer it to them at any time.

The Court dismissed the claim.

Regarding s1017 Limb One, the Court decided that being shareholders of Matchmount did not give the Claimants personally any interest in Matchmount’s property. To hold otherwise would have been an impermissible piercing of the corporate veil.

Second, having the benefit of landlord covenants did not give them Claimants a sufficient interest in the property. Whilst a full proprietary interest might not be necessary, some sort of interest was required which created an entitlement to the Property itself. Simply having the benefit of landlord covenants did not come close.

The Court rejected the argument advanced for s1017 Limb Two for a simple reason.  Whilst the Claimants were under a liability in respect of the leasehold estate (IE, to observe tenant covenants) they were under no liability in respect of the freehold estate. As the disclaimed property in question was the freehold, the requirements of s1017 Limb Two were not met.

Further, the Court noted the compensatory aspect of Limb Two.  Before a vesting order could be made, the Court needed to identify a balance between the windfall gained by the vesting order and the liabilities caused by the disclaimer. Here, there was no clear evidence as to that balance. However, doing the best it could, the Court identified that the freehold to the Property did have a real value, which far outweighed what had been identified as the liabilities faced by the Claimants (assuming they had been liabilities relating to the freehold).  For the avoidance of doubt, simply being mucked about was not a relevant liability for these purposes.

Finally, the Court rejected the case for s181 LPA 25. This would have required the Claimants to show a subsisting, enforceable right to the Property. Whilst it was permissible for that right to require some further steps before it could be enforced, it must have been an identifiable, enforceable right. Simply having the ability to transfer the Property from the Company to the Claimants was insufficient. The Company had to be under some sort of existing obligation to make the transfer at the point it dissolved. The normal examples of this would be an option having been triggered, or a sales contract having been formed.

The judge noted that the outcome sought by the Claimants would have been highly convenient, but that the legislation simply did not empower the Court to make orders in the circumstances identified.

The case is useful for showing the clear steps the Court will undertake when considering vesting order applications, and practitioners may wish to consider the approach taken when advising clients. It is also useful in showing that the Court will adopt a strict approach when applying the statutory tests, even in claims which are unopposed. 

Whilst every effort has been taken to ensure that the law in this article is correct, it is intended to give a general overview of the law for educational and/or informational purposes. It is not intended to be a substitute for specific legal advice and should not be relied upon for this purpose.

This article represents the opinion of the author and does not necessarily reflect the view of any other member of St Philips Chambers.