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The cautionary tale of the forgetful tenant – landlords and ‘dissolved’ tenants

Andrew Upton | 23 Sep 2015

INSIGHTS

Commercial tenants who find themselves a little behind with their Companies House filings should give some consideration to an Inner House decision released this week.

In ELB Securities Limited v Love and others, the tenant company had failed in its statutory obligations, including failure to lodge company accounts over a six-year period, due to what are described as “administrative oversight”. Unsurprisingly, it was struck off the Companies Register.

The landlord, having obtained a notice of disclaimer from the Queen’s Lord Treasurer and Remembrancer, proceeded to seek recovery of possession from the occupier.

The occupier, who had been a director of the tenant company, petitioned the court to have the tenant company restored to the register. The company was subsequently restored, became a defender to the action raised by the landlord, and sought to argue that the lease was continuing following the restoration, the Companies Act 2006 providing that the “general effect” of such an order is that “the company is deemed to have continued in existence as if it had not been dissolved or struck off the register”.

However, the Inner House has determined that the use of the word “general” prior to effect means that this general provision may give way to special provisions.

In this case, reliance was placed by the landlord on the notice of disclaimer from the QLTR. Once the tenant was struck off, its assets (including the tenant’s interest in the lease) vested in the QLTR. The QLTR subsequently disclaimed the company’s rights in the lease. It followed, therefore, that the company’s rights in the property had terminated.

Accordingly, the court held that the lease was at an end from the date of the notice of disclaimer.

This decision provides helpful clarification of the interaction between property vesting in the QLTR following the dissolution of a company and the effect of restoration to the register. Those landlords who have found themselves with a commercial property and a dissolved tenant can now go forward with the comfort of knowing that the tenant’s subsequent restoration will not cause any difficulties for a new letting arrangement, so long as a notice of disclaimer has been obtained.

A copy of the full decision is available here.