When a field has no owner: pitfalls for buyers of rural land

One of the more unusual quirks of English land law is that land can, in effect, end up with no owner at all. It sounds like an anachronism but in a land transaction context it is a real and current issue - and one that has been tested in the courts again this year. Here is what to look out for.

How land ends up ownerless

It is not unusual for land or property to be held in a company. If that company is later liquidated or struck off the register, any land that it holds must be specifically distributed out of the company. If this step is missed and the land is still in the company when it ceases to exist, it is deemed to be 'bona vacantia' (ownerless property) and it passes to the Crown or to the Duchy of Lancaster or Cornwall depending on where the land was located.

If the Crown decides that the land is a liability, then it is permitted to disclaim its interest. At this point the land will be 'escheat'. The effect of land being held in escheat is to send it straight back to the Crown by a different route. As one High Court judge put it earlier this year, this is something of a 'boomerang effect' that nobody drafting the modern legislation seems to have intended. 

The practical effect of this is often for the issue to go unnoticed until someone tries to buy the land, mortgage it, or build on it.

Why this matters to a buyer

The Crown does not step into a landowner's shoes in the way you might expect. It takes no responsibility for the land, does not assume any mortgages or charges attached to it, and is generally reluctant to get involved at all unless it has to. That creates some practical headaches:

• Old charges can still be lurking - a disclaimer by the Crown does not wipe out existing mortgages, charges or leases over the land - they simply carry on, even though there is no longer anyone obviously responsible for dealing with them. A buyer can find a forgotten legal charge or lease still attached to land, with no live borrower to negotiate a release.
• The Crown is not a willing seller - the Crown is under no obligation to sell escheated land, however logical a purchase might seem, and dealing with the Treasury Solicitor's office or the Crown Estate's own solicitors can be a slow process, with any deals priced at full market value.
• A forgotten connection to the old company is not enough  - even if a buyer or business were closely tied to the company that used to own the land - as a director, shareholder, or even the person who effectively paid for it - that does not give them an automatic right to reclaim it. The courts have made this very clear in a string of recent decisions.
• A revived company can complicate matters - a struck-off company can normally be restored to the register within six years, and if that happens before the Crown has dealt with the land, ownership questions can be reopened.
• Long use of land is not always a safe bet - if an owner has treated a piece of land as their own for many years without formal title, be aware that where the paper owner was a company that has since been dissolved, the usual 12-year period for establishing a claim through long occupation can extend to 30 years.

A cautionary tale from the courts

The point was illustrated neatly earlier this year in Lulham v Crown Estate Commissioners. A couple had bought a freehold property through their own company and held long leases over flats within it. When the company was later struck off for failing to file paperwork, and the Crown formally disclaimed the land, the couple applied to the court to have the freehold vested back in them. 

The court accepted they were in a genuinely difficult position, but refused the application: being the couple behind the company, even having originally funded the purchase, was not enough to give them a personal legal claim to land that had, in law, always belonged to the company and not to them.

The lesson for anyone in a similar position, whether trying to recover land their own company once held or looking to buy land in this state from a third party, is that sentiment and history count for very little. What matters is a clear, subsisting legal right, established well before the point of dissolution.

Practical due diligence points

• Run a company search against the registered proprietor, not just a title check. If the seller (or the owner of a neighbouring plot) is or was a company, confirm it is still active. Farmland titles frequently lag behind changes in corporate status.
• Check for a note of escheat or disclaimer on the register. HM Land Registry can enter a note when a freehold has determined, though it is not obliged to do so, which means the register may not always flag the problem.
• Do not assume the Crown will simply sell. Approaches to the Treasury Solicitor's Bona Vacantia Division or the Crown Estate's appointed solicitors (or, in the Duchy counties, their solicitors) can take time, require evidence of the buyer's legitimate interest, and will be priced at market value with the buyer typically covering the Crown's legal and valuation costs.
• Factor in the risk of restoration. Because a struck-off company can normally apply for restoration within six years of dissolution, an acquisition completed shortly after dissolution carries a residual risk that the transaction could be challenged if the company reappears on the register.

The bottom line

Ownerless land is a genuine, if unusual, feature of English conveyancing, and the law governing it remains rooted in centuries-old doctrine that produces some counter-intuitive results. For buyers eyeing an adjoining field, a woodland, or an access strip with a murky ownership history, the message from recent case law is consistent: informal connections to a dissolved company, however strong they feel in practice, rarely translate into a legal right to the land. Proper title investigation, a company search, and early engagement with the Crown's representatives will save far more time than trying to fix the position after exchange.