Prime Noble Properties Limited (in administration) v The Residential Leaseholders

The court may order possession and sale under Civil Procedure Rules 1998 Part 73 where a valid charging order exists and the procedural requirements are met. The discretion should be exercised by reference to the practical interests of all concerned, including whether the property is otherwise effectively unsaleable and whether the proposed course best realises value.

In a complex insolvency realisation, the court may determine the distribution methodology where this assists certainty and avoids further delay and cost. Administrators may recover properly incurred property-realisation costs under section 105 of the Law of Property Act 1925 and, where applicable, under the Berkeley Applegate jurisdiction. Where the available fund is limited and leaseholders hold only unsecured claims for deposits, equality may be the fairest recognised legal solution.

The joint administrators applied for possession and sale of 53 residential long leases forming part of an unfinished development. The applicant had acquired and sought to enforce a charging order over the property. The freehold, headlease and individual leases were effectively unsaleable because of overlapping encumbrances, although the property would have substantial value if sold with clear title.

The application also sought approval of a proposed distribution of the sale proceeds, including payment of the charging order and realisation costs, division between the freeholder and applicant leaseholder, and equal division of the residential leaseholders’ share. Several leaseholders consented or did not respond; two attended and raised concerns, including the effect of unequal deposits.

1. Possession and sale. The court had jurisdiction under Part 73 of the Civil Procedure Rules 1998 and a discretion whether to make the order. Given the valid charging order, compliance with procedural requirements, the property’s effective unsaleability in its existing form and the absence of any more beneficial alternative, possession and sale of the 53 residential long leases was ordered.
2. Realisation costs. The administrators were entitled to recover properly incurred costs, charges and expenses incidental to the sale under section 105 of the Law of Property Act 1925. The court also accepted the Berkeley Applegate principle, because the administrators were taking steps in a dual capacity to realise value for the company and for all interested parties. The order was to identify recoverable and excluded costs and provide continuing information and a mechanism for challenges to the proposed deductions.
3. Distribution. The court approved payment of the charging order, followed by administrators’ allowable costs. It approved the agreed 30/70 division between the freeholder and applicant leaseholder, and the proposed 55/45 division of the applicant leaseholder’s share between the applicant and residential leaseholders.
4. Residential leaseholders. The residential leaseholders’ 45% share was to be divided equally. The relevant proprietary interests were treated as equal, there was no evidence of substantial differences in the value of the proposed flats, and the court was required to choose the fairest outcome applying recognised legal principles. Unequal deposits did not justify preferential distribution because the leaseholders’ deposit claims were unsecured and the available fund was limited.