Brodies (instructing Evie Barden of Landmark Chambers) made an urgent application to the Insolvency Court on behalf of a commercial landlord who had recently purchased a multi-million-pound commercial property, seeking to prevent the dissolution of the selling company that had been in administration.

Lucie Barnes

Lucie Barnes

The seller was due to move to dissolution following a notice filed by the company’s former joint administrators. The purchaser urgently needed to become the registered proprietor to serve a counter-notice opposing the requested new tenancy upon the occupational tenant.

The court held that the joint administrators were not in office at the date of registration as they had failed to extend the administration prior to it coming to an end due to the passage of time. Therefore, the administrators’ notice was legally void, meaning the company would not be automatically dissolved.

Purchasers should be aware of the risks involved in buying property in a distressed market. They are different depending on the particular type of insolvency process that the seller is in. For example, the process of giving notice is distinct when moving from administration to dissolution, compared with administration to creditor’s voluntary liquidation.

There can also be a delay – or registration gap – between the purchase completion and the purchaser being registered as proprietor on the property title. During this time, the purchaser is generally unable to deal with, or serve notices upon, sitting tenants. While it will be the beneficial owner, it is not the legal title owner of the property until Land Registry registration.

This can cause problems in the case of protected leases where tenants initiate the lease renewal process, as was the case in this matter. Once the request is made, a landlord has only two months to serve a counter-notice (otherwise the tenant is automatically entitled to the new lease it seeks) and the registration gap can long exceed this.

It is important to seek specialist legal advice prior to purchasing property in a distressed market to fully understand the potential pitfalls.

Lucie Barnes is a partner at law firm Brodies