Restoring a Management Company to the register

Friday, December 14, 2018

As you will know, many leases, those which pre-date and post-date the Landlord and Tenant (Covenants) Act 1995, feature a leasehold management company (a “Management Company”), which is normally tasked with undertaking management of the residential flats under the terms of a Lease.

A Management Company might have a separate agreement with the freeholder, or the scope of its duties and powers contained with the terms of the Lease.

This article addresses what options are available (non-exhaustive) where a Management Company is removed from the register of companies held at Companies House of England and Wales (“Companies House”).

It is not uncommon for a Management Company to either have been dissolved by the directors or, to be struck off the register at Companies House for failing, for example, to file statutory documents (usually annual returns). This typically occurs with small owner-managed properties (but can also apply to larger commercial outfits) where the flat owners have not kept an eye on Companies House deadlines. It is a simple mistake to make, however has the potential to open the company up to a whole host of problems. If the company is dissolved, its bank account(s) will be frozen and its assets deemed to belong to the Crown (Bona Vacantia). If the Management Company owns the freehold of the property, this will pass to the Crown, and the resultant defective Lease will mean that the flat owners will be unable to sell or mortgage (or re-mortgage) their property.

There are two options available to rectify this situation by: (i) an application to the Court to restore the defunct company to the register; or (ii) an Administration Restoration Order. Both options are only available within 6 years from the date of dissolution of the company and in circumstances like this, the application would need to be made by a former director or member of the company, who held office at the time of dissolution.

It goes without saying, that there are advantages and disadvantages of both options, and whether option (i) or (ii) is taken, very much depends on the circumstances. Both options involve applying to the Treasury Solicitor to effectively give up his interest in the property and can take somewhere between 5 – 10 weeks to complete (although you should allow some flexibility in this time).
One of the most notable downsides, is that any application to purchase the Treasury Solicitor’s interest in the property, will require you paying his costs, your own costs and land valuation costs. This can be a big deterrent to anyone thinking of this approach, but for others, there is little option but to go down this route.

Where, for example, it is not the Management Company but the original developer of the property, it may not be possible to restore the company to the register.

The ramifications of serving invalid demands can be serious. This is especially so where defective demands have gone unnoticed and forfeiture proceedings have been issued on the basis of them. If the rent has been demanded incorrectly the rent will not be due and this will most likely mean that any possession proceedings commenced on the basis of them will have to be withdrawn. This is likely to leave landlords without rent and facing the prospect of having to pay court fees and the costs of their own lawyers and lawyers instructed by any defendant or mortgage company. PDC Law will ensure that demands have been demanded in the correct form. Where non-compliant demands are identified we will help you to serve proper, valid, demands before seeking to recover sums due.