Don’t get trapped – mind the gap

Commercial Property | 23rd March 2018

In the fast moving world of commercial property, and in particular business leases, deals are struck quickly, money changes hands, a new occupier moves into their dream premises and may then decide the premises are not right for them.

Fortunately they negotiated a break clause in the lease so everything will be alright? If only life were that simple.

This is where the so called ‘Registration Gap’ rears its ugly head.

The Land Registry are overworked and under resourced. It takes an average 13 weeks  to register a new lease (if everything goes smoothly); it can take almost as long to register the transfer of a freehold.

The Land Registration Act 2002 says that until someone is the registered owner at the Land Registry, they do not own the legal title to land.

This means that where a freehold has been transferred or a lease granted and the registration is not yet complete the new freeholder or new tenant only has an equitable interest in that land; they do not legally own it. The original transferor or landlord remains the legal owner and holds the land on bare trust for the new owner or tenant.

The problems of the Registration Gap arise in these key areas: First, serving a break notice under a lease – who should the notice be served on and who can actually serve the notice? Secondly, where an under-tenant wants to sell on their under-lease but their own head landlord has not yet been registered at the Land Registry who do they approach for licence to assign and crucially who should the rent be paid to? Thirdly, how does  a mortgagee exercise their power of sale if the mortgage has not yet been registered at the Land Registry? Fourthly, a seller will be a little surprised to find they remain liable for a planning enforcement notice until their buyer is registered at the Land Registry.

 

For advice on how to deal with any issues on the Registration Gap please contact the commercial property team at Hart Brown who will be delighted to assist.

This is not legal advice; it is intended to provide information of general interest about current legal issues.

John Guthrie

Senior Solicitor, Commercial Property

John started his career at Hart Brown in 2016. He is a Commercial Property solicitor with 18 years post qualification experience in property. He i...