Green Parks (Holdings) Limited, Re

Where a vesting order transfers only part of a disclaimed lease, the recipient takes the liabilities that bound the company when winding up began, as if the lease covered only the vested property. The court must apportion the existing rent, rather than reprice it on broad grounds of fairness. The apportioned rent is the share fairly attributable to the vested property’s value, assessed by reference to facts known or reasonably foreseeable at the commencement of winding up. Factors outside the landlord-and-tenant relationship under the lease are irrelevant.

In the insolvent liquidation of Green Parks (Holdings) Limited, the liquidator disclaimed the company’s freehold and 125-year development underlease. Earlier orders vested the freehold in Landinvest, the headlessee, and part of the underlease, comprising blocks 3 and 5, in trustees for 62 occupational underlessees. The leasehold vesting order made the trustees subject to the company’s liabilities, including an apportioned share of the rent.

The court was asked to determine the rent apportionment, Landinvest’s claims for insurance costs, an alleged unpaid headlease premium and insolvency set-off, and costs of an electricity connection. The electricity-cost issue had been settled by agreement.

1. Rent apportionment. Under the Insolvency Act 1986, a person taking a vesting order is subject to the same liabilities and obligations as the company at the commencement of winding up, as if the lease comprised only the vested property. The court must apportion the rent originally reserved where only part of the demised premises is vested. It cannot commercially re-evaluate or renegotiate the rent on wider grounds of fairness. The apportioned share is the part fairly attributable to the value of the vested property, assessed by reference to facts known or reasonably foreseeable at the commencement of winding up. Matters extraneous to the landlord-and-tenant relationship under the lease are disregarded. The incomplete communal facilities, mismatched rent-review dates and the applicants’ position under their occupational sub-underleases did not alter the apportionment.

   The court fixed the annual apportioned rent at £70,000. It did not attribute nil value to the two unfinished duplex units: although the Leasehold Reform (Ground Rent) Act 2022 meant that a new long lease could carry only peppercorn ground rent, the units could generate holiday-let income and had been included in the original rent calculation.

2. Insurance. Landinvest established its claim for the 2020–21 insurance costs under the development underlease and its indemnity. The claim for 2021–22 failed because the right-to-manage company had itself taken out insurance for that period. The applicants could not rely after trial on an unpleaded contention that a deed of variation had deleted the insurance covenant. Allowing the new point would have been unjust to Landinvest, which had not had an opportunity to plead and establish rectification.

3. Premium and set-off. The court found that the full consideration for the headlease had been paid through netting sums due between the companies. The Whitefield applicants therefore established no unpaid amount capable of supporting insolvency set-off. An anti-set-off clause does not prevent parties from agreeing to net payments against each other.

4. Electricity costs and consequential matters. The parties had settled the electricity-cost issue, so no determination was required. The court extended the time for appealing until 21 days after the consequential hearing.

This was a first-instance determination of issues reserved by ICCJ Prentis’s leasehold vesting order dated 9 May 2024. The judgment also recounts the freehold vesting order of 24 March 2023 and the step-in order of 6 June 2024. No appellate decision is stated.