JB Leitch Success in Complex High Court Proceedings

JB Leitch secures vesting order, premium, arrears & costs for landlord & management company clients in complex High Court proceedings

JB Leitch acted for our landlord and management company clients in complex High Court proceedings, securing a settlement including the payment of arrears and a general indemnity which satisfactorily restored the positions of parties and maintained occupation of premises as intended.

The background

The subject property comprised 4 ground floor commercial units in London, above which was a block of residential flats. J B Leitch was instructed by the freeholder over the whole block, and its appointed management company, to handle complex proceedings which arose in respect of the disclaimer of the headlease of the commercial units.

The headlease had been granted by our freeholder client’s predecessor in title in 2015 to a property holding company (“BB”). BB subsequently granted two subleases of the premises: one to “MSH”, and the second to “AAY”.

BB entered into voluntary liquidation in 2023 and the liquidators disclaimed the headlease, bringing to an end all of the head lessor’s rights and obligations under the head lease and the subleases effectively fell away, albeit the subtenants were entitled to continue in occupation of the property subject to compliance with the tenants obligations contained within the head lease. As disclaimer itself did not result in the freeholder and subtenants acquiring direct rights against each other, the parties wished to re-engineer the position to form a contractual relationship between the parties, enabling the sub-leaseholders to remain in occupation whilst clearing arrears of service charge and fees owed by the company in liquidation.

For ease of reference, the parties are referred to as:

Party A: MSH (leaseholders under the “MSH Sublease”)
Party B: AAY (leaseholders under the “AAY Sublease”)
Party C: J B Leitch’s freeholder client
Party D: J B Leitch’s management company client

Following negotiation, a settlement has been reached by the parties and a new leasehold structure agreed which restores Party A and Party B to their equivalent positions prior to the disclaimer of the BB headlease.

The agreement

The parties have agreed a mechanism which restores the ‘status quo’ of the parties prior to the disclaimer of the head lease, settles payment of arrears and restores lawful occupation of the premises to the leaseholders.

1. By a vesting order, the entire demise of BB’s headlease is vested in Party A
2. Party A surrenders to Party C that part of the headlease demised to Party B under the AAY Sublease
3. Party B surrenders the AAY Sublease to Party C
4. A new lease of the AAY Sublease’s demise is granted by Party C and Party D to Party B

Parties A and B agreed to settle the arrears due under the BB headlease, the costs incurred by the freeholder client including those to be incurred in dealing with the transaction, and agreed to pay a premium in respect of any variations made to the head lease to ensure continuation of occupation on mutually acceptable terms.

Proactive, expert advice that protected our landlord client

JB Leitch secured an excellent result in these High Court proceedings, protecting our landlord client’s position and, together with the management company, its ability to control the management of the block whilst providing certainty as to the payment of arrears and ensuring that leaseholders benefit from security in their occupation of the commercial units. Further, our clients’ costs were indemnified for all sums incurred, including costs.

This was a complex matter, settled efficiently prior to hearing in order to mitigate exposure to costs, and demonstrating the benefit of specialist litigation expertise backed by a strong working relationship with our freeholder client.