Bridging the registration gap


Author: Madeleine Holding


Madeleine Holding, Associate, Fladgate LLP  (mholding@fladgate.com)


 

For most buyers of registered land, the deal is done on completion of the transfer, when the purchase price is paid and they are given the keys to the property. However, there are important post-completion formalities to which solicitors must attend. Legal title to registered land does not pass to the buyer until the transfer is registered at HM Land Registry. The ‘registration gap’ is the period of time between completion of the purchase and completion of registration. During the registration gap the seller holds the legal title on trust for the buyer, who only has a beneficial interest in the property.

Extending the gap

HM Land Registry has announced that, in a bid to prevent fraudulent applications, it will be carrying out extra checks when customers apply to discharge a mortgage using paper form DS1. Extra checks mean it may take longer to complete applications. Therefore, if a DS1 is lodged at the same time as a transfer, the registration gap will be longer than has previously been the case for “simple” transfers of whole. Lenders should therefore be asked to remove mortgages electronically to avoid delays.

In most cases, the registration gap is not a problem. But issues often arise where management steps need to be taken during the registration gap. The following cases demonstrate this issue:

Sackville UK Property Select II (GP) No.1 Ltd v Robertson Taylor Insurance Brokers Ltd [2018] EWHC 122 (Ch)

The tenant assigned its lease to the assignee with the knowledge and consent of its landlord. Contrary to the obligation in the licence to assign to register the transaction within ten days of completion, the assignee’s application was not made until over three months after the transaction completed. The assignee’s solicitor served a break notice on the landlord before completion of the registration; in other words, during the registration gap. The court held that the break notice was invalid.

The consequence is that the lease will continue until the end of the contractual term, a further five years after the intended break date. It’s likely that had the assignee registered the assignment within the ten days after completion, registration would have been complete by the time it served the break notice and the notice would therefore have been valid. This serves as an important reminder to apply to register as soon as possible after completion.

Baker v Craggs [2018] EWCA Civ 1126

The buyer’s purchase was completed and the buyer occupied the property. His solicitor applied to register him as the new owner, but the transfer plan was incomplete and the application was cancelled. As a result, a new application had to be made. In the intervening period, the seller granted a right of way over the land to a third party without the buyer’s knowledge or consent. The right of way was successfully registered and noted against the title to the buyer’s land.

Fortunately for the buyer, the court decided that the buyer’s rights of occupation took priority over the right of way granted during the registration gap, and the right should be removed from the buyer’s title. The buyer was lucky. Had he delayed moving into the property, the right of way might still be registered against his title. But importantly, the case confirms that the buyer’s beneficial interest can be protected by law if the buyer is in occupation.

Bridging the gap

There are ways to mitigate the problem of the registration gap, even at an early stage in the transaction. Buyers should ensure that their solicitor is aware of any management steps that need to be taken shortly after completion of their transaction. The solicitor can then include provisions in the purchase agreement for the seller to manage the property and serve any notices required by the buyer during the registration gap in accordance with the buyer’s instructions. Later, buyers should carefully consider on whom they should serve notices. Many notices are time-critical so there is no time for mistakes.

Until full e-conveyancing is in operation – a distant prospect when one considers the complications of first registrations and transfers of part – the registration gap is not going away any time soon, and clients and their advisers must be mindful of it in all dealings post-completion and pre-registration.

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