Possession: unencumbering the title of a failed development

Under CPR 73.10(c) a person who has obtained a charging order over an interest in property can apply for an order for sale of the property. In respect of a failed development with a complicated title, an application made under CPR 73.10(c) is a potential avenue by which encumbrances can be cleared and the value of the property fully realised. In Prime Noble Properties Ltd (in administration) v The Residential Leaseholders [2022] EWHC 2271 (Ch) joint administrators of the appellant company applied for the enforcement of a charging order by way of an order for sale of a number of residential long leases related to a development site at Ford Lane in Salford, Greater Manchester. The site was intended to be a development of 119 flats but remained effectively a cleared site with the benefit of some ground works and continuing planning permission for the development. The freehold title to the property was owned by a company in administration. The freehold was subject to a charging order originally granted to a third party. The charging order was protected by a unilateral notice. The applicant company was the holder of the headlease for a term of 250 years. The headlease was subject to the charging order because it was entered into after the charging order was obtained without the consent of the third party while protected by the same unilateral notice. As well as being subject to a mortgage, of which the mortgagee was a dissolved company, there were also 53 residential subleases, each granted for a term of 150 years. Each long lessee paid a deposit, in varying amounts, to obtain their lease. The leases were also subject to the charging order as well as mortgages in favour of the company to secure the deferred consideration for the balance of the purchase price. Of the remaining 66 intended flats not subject to those leases, 21 unilateral notices were registered against the headlease, each protecting the still uncompleted agreement for a lease. When works ceased on the development in 2017, approximately £2.7m had been collected in deposits. By the time the applicant went into administration in 2019, this sum had been spent. In 2019, the administrators attempted to sell the unencumbered freehold interest. The highest offer was £2.5m but there was no interest in any of the lesser encumbered estates. A valuation obtained by the administrators in October 2021 provided only nominal values for both the headlease, the freehold title and the individual residential long leases due to the complications of the ownership of the site. The various interests were effectively unsaleable unless the property became realisable in legal terms. If all of the encumbrances were cleared, the market value for the freehold title was valued at approximately £2m. With the aim of clearing the encumbrances, the applicant took an assignment of the charging order, giving notice to all concerned. It then applied to the court to enforce the charging order by way of an order for possession and sale of the 53 residential long leases pursuant to Part 73.10(c). The aim was to sell the property free of encumbrances and distribute the proceeds of sale. The applicant accepted that, at that stage, the administrators would be required to apply under paragraph 71 of Schedule B1 to the Insolvency Act 1986 for permission to sell the leases free from the unilateral notices registered by the 21 persons who agreed to purchase the lease but did not, in fact, do so. On the basis that there is a valid charging order and the procedural requirements were complied with, the court accepted the applicant was prima facie entitled to an order for possession and there was no reason why it should not exercise its discretion to grant the same. Elizabeth Dwomoh is a barrister at Lamb Chambers