Re-structuring your business? Don't forget your properties!

21 October 2009

In this article Barbara Winnett discusses the implications of an incorrect name on property deeds and the serious problems it has caused some of her clients

Many clients take advice from their accountants as to how to structure their business, but then are not advised to consider the implications of any change in their business set up on the property they own. This can have unexpected and expensive consequences, as clients of mine recently discovered. In one case, they were told that their premises now belonged to the Crown and were threatened with eviction, and in another, a proposed sublet was hindered.

When a business is re-structured, it is important to take advice as to whether the name on the property deeds should be changed. A partnership, a limited liability partnership (LLP) and a company are all different legal entities, and even if you are still in charge of the business, you should address the legal ownership of the buildings. If you set up a company or an LLP, it is wise to consider the transfer of the premises to the new legal entity straight away, before the issue is forgotten. It may raise its ugly head at a most inconvenient time for the business and involve unforeseen costs.

A client company was set for expansion, and applied to its landlord for licence for alterations. The landlord made enquiries and discovered that the lease was in the name of an LLP, but the tenant had restructured and formed a limited company to run the business. Unfortunately, the LLP had been dissolved, so the lease had no owner and transferred “bona vacantia” to the Crown. The company had no premises!

The term "Bona Vacantia" literally means vacant goods and is the legal name for ownerless property, which by law passes to the Crown. The Treasury Solicitor is the Crown's Nominee for the purposes of the administration of the estates of persons who die intestate and without known kin and for the collection of the assets of dissolved companies.

To sort out the muddle, the client company had to buy the lease back from the Treasury solicitor, also paying not only the Crown's costs but also the costs of the Landlord for its consent to the transfer.

Another client had a problem after the partnership formed an LLP. The lease was left in the names of three of the partners, rather than being transferred to the new LLP. A few years later, the LLP wanted to sublet part of their premises, but the three property-owning partners had retired. The LLP had no title to grant the sublease as its name was not on the deeds. It was forced to chase around the golf course for the signatures of the retired partners!

There are many other cases where transactions are complicated and delayed by issues arising from the deeds not reflecting the current situation. It is important to ensure that what may seem like a theoretical change of ownership is documented properly and in due time. It also makes sense to check that addresses for service are updated. Now that the Land Registry no longer require or issue real physical deeds, it is more important than ever to ensure the correct name and address are registered on the virtual deeds.

For more information on this subject or any other legal matter,
please contact us:

Tonbridge: 01732 770660
Sevenoaks: 01732 747900
Email: marketing@warners-solicitors.co.uk