The Court of Appeal considered whether sellers under a sale and rent back agreement could seek to recover the property from a later purchaser, in a dispute between the Orchards and Ms Dhillon.
Key facts
- Who: Jeffrey and Ann Orchard and Daljit Dhillon, the parties to the appeal; the issue arises where a sale and rent back property has passed to a later owner
- From: 23 March 2026
- Source: Daljit Kaur Dhillon v Jeffrey Orchard & Anor [2026] EWCA Civ 346
In Daljit Kaur Dhillon v Jeffrey Orchard & Anor [2026] EWCA Civ 346, handed down on 23 March 2026, the Court of Appeal (Civil Division) considered whether Jeffrey and Ann Orchard could seek to recover a property they had transferred under a sale and rent back agreement from Ms Dhillon, who bought it from the original buyer. Lord Justice Newey gave judgment. He sat with Lady Justice Asplin and Lord Justice Snowden. The hearing took place on 26 February 2026.
Background
In late 2010, the Orchards transferred their home in Grays, Thurrock to Red 2 Black Properties Limited (R2BL) for £112,000, which was 70% of a desktop valuation. They became tenants under an assured shorthold tenancy at £700 a month. Debts of between £74,000 and £78,000 were secured on the property.
In March 2013, Ms Dhillon, who by then owned R2BL, bought the property from the company for about £115,000. She later granted a charge over it to her father. R2BL was dissolved in 2016 and Ms Dhillon was made bankrupt in June 2016. In 2022 she began possession proceedings against the Orchards for rent arrears.
The Orchards said they had been induced into the agreement by fraudulent misrepresentation. They also said they were entitled to recover the property because of breaches of the Financial Services and Markets Act 2000 (FSMA) and the Regulated Activities Order 2001. Entering into a sale and rent back agreement by way of business is a regulated activity, and R2BL was not authorised to carry it on.
The question
The question was whether the Orchards' right to recover the property under FSMA, arising from R2BL's lack of authorisation, could be enforced against Ms Dhillon as a later owner.
The earlier decisions
At trial, His Honour Judge Duddridge was not satisfied on the balance of probabilities that there had been a misrepresentation, fraudulent or otherwise. He held that Ms Dhillon was not carrying on the activity by way of business. He ordered the Orchards to give up possession and to pay £97,000 in rent arrears.
On appeal, Mr Justice Miles ([2025] EWHC 834 (Ch)) accepted the Orchards' argument on three points:
- the agreements could be set aside under section 26 FSMA;
- their right was a "mere equity";
- that right bound Ms Dhillon as an overriding interest protected by actual occupation.
He read sections 26 and 28 against the general law of rescission. On that reading, the right was not automatically defeated by a transfer to a third party, subject to defences such as that of a bona fide purchaser. Ms Dhillon challenged that decision in the Court of Appeal.
What this means for sellers and buyers
The appeal concerned whether rights under FSMA can be enforced against a later owner of a property sold under a sale and rent back agreement. Anyone affected by a sale and rent back arrangement, whether as a former owner, tenant or later buyer, should get advice on their own position before any deadline passes.
Sources
- Daljit Kaur Dhillon v Jeffrey Orchard & Anor, [2026] EWCA Civ 346, Court of Appeal (Civil Division), 23 March 2026