The registration gap is the period of time between the completion of a transaction and the buyer being registered as the proprietor at the Land Registry. B P Collins’ residential property solicitors explore how it can affect property transactions.
Who is the owner of the property during the registration gap?
During this period, the seller will hold the legal title of the property on trust for the buyer. Until the legal title is registered, the buyer will only have a beneficial interest in the property.
How does the registration gap affect you?
The impact of the registration gap will depend on the nature of the transaction. For example, if a buyer intends to sell the property relatively quickly following completion of the purchase, possibly after carrying out some minor renovations to increase the value, they may come into difficulties if legal title has not yet transferred. A Buyer would have to wait until the legal title has been officially registered before it could sell. This is particularly significant at the moment following the disruption of the pandemic as the Land Registry experience increasing delays in processing applications, meaning the gap widens. Therefore, it is important that the buyer considers what options they have when entering into the transaction to protect their position.
More specific examples:
The Registration Gap and Notices to Quit
Stodday Land Ltd v Pye saw the High Court hold that notices to quit an agricultural tenancy under the Agricultural Holdings Act 1986 were not valid at common law. The purchasing landlord served a notice to quit after completion but before they were the registered land proprietor. As such, the notice was invalid because it was not given by the legal owner of the reversion. It is well established that only a legal owner can give a notice to quit. The judge in Stodday suggested a solution – that the transferee/buyer will become the agent of the transferor/seller in respect of matters concerning the land subject to the sale. This approach has been adopted in practice to avoid certain difficulties arising from the gap.
The Registration Gap and Enforcement Notices
The Town and County Planning Act 1990 states that where an enforcement notice has been served but not complied with, then the owner of the property is liable for the breach. In East Lindsey District Council v Thompson the Court held that the seller remained liable to comply with an enforcement notice until the legal title was transferred to the buyer upon registration of the transfer. This is important to consider when selling a property subject to a planning enforcement notice as your liability as the seller does not necessarily end upon completion. It is particularly vital to consider because of the potential criminal consequences for failing to comply with such an enforcement notice.
What can be done to minimise the effects of the registration gap?
As mentioned above, the buyer and seller can include a clause into the contract that makes the seller the agent of the buyer. This can be particularly helpful when considering exercise break notices in commercial contracts, as break rights can only be exercised by the person who is the registered legal owner.
Clauses can be inserted into contracts to force the Seller to serve the appropriate notices/documents during the registration gap.
If a tenant needs to serve notice on a landlord, or a landlord needs to serve a notice on a tenant who has assigned a lease, it is good practice to check the title to see if there is a pending application for registration. To be on the safe side, you could serve a notice with the registered proprietor/owner/tenant and a copy to the buyer/tenant.
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