Maidstone Freehold Escheat Case: Court Rejects Vesting Order Application, Rules in Favor of Crown
Title: Freehold Denied to Kent Tenants: The Crown's Reversion Trumps Court Powers
Published: June 25, 2025
The High Court Refuses Vesting Order for Maidstone Kent Property Reverted to the Crown
In a recent ruling on June 24, 2025, the High Court rejected the application of two tenants for a vesting order over the freehold of their residential property in Maidstone, Kent, after determining they had no relevant interest or enforceable right in the escheated land. This decision sheds light on the boundaries of the court's powers under both section 1017 of the Companies Act 2006 and section 181 of the Law of Property Act 1925, particularly in cases of escheat.
The Background
Robert and Nichola Lulham, the leaseholders of two flats within the property, applied for a vesting order due to the dissolution of their former company, Matchmount Limited, in 2010, which had acquired the freehold in 2005. The company had been disclaimed by the Treasury Solicitor in 2022, and the freehold interest, being bona vacantia, escheated to the Crown. The claimants argued that their position as the company's sole shareholders and directors, and their ongoing leasehold obligations, entitled them to the freehold.
The Ruling
Deputy Master Holden dismissed all the claimants' arguments, citing that their roles as shareholders and directors did not give rise to any proprietary interest - a decision in line with the UK Supreme Court's decision in Prest v Petrodel Resources [2013] - and that their leasehold rights did not make them "entitled to" the freehold. The court also found that the claimants' liabilities did not meet the statutory test laid out in section 1017(1)(b).
On the alternative ground under section 181 of the Law of Property Act, the court again ruled against the applicants, asserting that they lacked any enforceable entitlement to the freehold at the time of escheat. The court refused to infer a beneficial interest in the company's landholding by piercing the corporate veil.
Takeaways
This decision underscores the limitations of the court's powers under both sections 1017 and 181 when it comes toescheat cases involving freehold property. Although leaseholders might hold a strong interest as tenants, the Crown's reversion rights after escheat take precedence. Leaseholders cannot, by court vesting orders, upgrade their interest to freehold ownership in the absence of specific legal provisions or arrangements. Courts have shown reluctance to grant vesting orders that could potentially undermine the Crown's title to the property after escheat.
[1] Enrichment Data: In escheat cases, the Crown's sovereign right of reversion supersedes court powers to vest interest, and leaseholders remain tenants unless separate legal mechanisms are in place.
In light of the court ruling, it appears that leaseholders like Robert and Nichola Lulham, despite their strong interest as tenants, cannot acquire freehold ownership of their properties through the court's vesting orders in cases where the property has escheated to the Crown. This decision signifies a potential opportunity for investors interested in real-estate, given the situation's implications for the finance sector, particularly in understanding the limits of court powers in relation to investing in escheated properties.
