236: Top tips for minding the Land Registration Gap

What is the Registration Gap?

On completion of the transfer of a property or the grant of a registrable lease, the legal title to that property does not pass until the transaction is registered at HM Land Registry. This period of time between completion and registration at HM Land Registry is referred to as the ‘Registration Gap’.

The Registration Gap can last for a significant period with some transfers of part taking approximately 18 months to register. As of 30 November 2022, HM Land Registry has implemented a new Digital Registration Service. The purpose of this new service is to expedite applications by making submissions as simple as possible and consequently reducing the length of the Registration Gap.

Although a potential improvement, this will not completely erase the gap and it is important to be aware of the following consequences caused by the delay in registration.

Legal implications of the Registration Gap for leases

i) Break clauses

Only a registered owner of a lease can serve a break notice on its landlord under the Landlord and Tenant Act 1954, as decided in Brown & Root Technology v Sun Alliance and London Assurance Co [1997] 1 EGLR 39.

In Brown v Root, the landlord had granted a lease to the original tenant and it was duly registered as owner. The lease included a tenant break option which was not actionable following any assignment of the lease.

As part of a corporate restructure, the tenant assigned the lease to a group company and such assignment was consented to by the landlord. The rent was subsequently invoiced to, and paid by, the assignee. As such, it appeared that the assignment had completed and legal title now rested with the assignee. In fact, no application to register the assignment at HM Land Registry was made.

Following the assignment, the original tenant purported to have exercised the break. The landlord disputed the original tenant’s right to do so, contending that the lease had been assigned and therefore the break option could no longer be exercised.

The court held that the original tenant was still entitled to exercise the break because an “assignment” meant a legal assignment. There was no legal assignment until the assignee was registered at HM Land Registry as the new proprietor of the leasehold title.

ii) Consents to lease dealings

Where a landlord has sold its interest in a property, the Registration Gap is an issue. In particular, to whom should the tenant apply to for consent to assign, underlet, or charge before the landlord’s transfer has been registered?

If the tenant has received no formal notice of the change of ownership, Section 23 Landlord and Tenant Act 1927 provides that, until the tenant has received notice of the new landlord, they are to serve notice on the previous landlord.

In circumstances where notice of the transfer has been given, there is a distinction between old and new leases.

If the lease is a ‘new’ lease granted after 1 January 1996, then on an assignment of the reversion, the new landlord has a statutory duty regarding the application for consent (whether or not it has been registered or not).

In the case of “old” leases granted before 1 January 1996, the legal title remains with the seller during the registration gap. It is advisable that the tenant applies for consent to the old landlord copying in the new landlord.

Practical points to note

Applications to register should be submitted as soon as possible to HM Land Registry after completion in order to minimize the period of the Registration Gap. In order to try and avoid Registration Gap problems, parties should also include certain provisions within transaction documents.

For example, provisions requiring the seller to take any necessary actions post-completion on the buyer’s behalf and in accordance with the buyer’s instructions to mitigate the impact of any delay in processing application at HM Land Registry. Additionally, when serving notices parties should carefully identify the correct parties on whom they should serve notices.