Sackville UK Property Select II (GP) No 1 Ltd & Sackville UK Property Select II Nominee (1) Ltd v Robertson Taylor Insurance Broker Ltd and (2) Integro Insurance Brokers Ltd [2018] EWHC 122 (Ch)

Serving break notices to end leases can be a risky business for tenants. The recent case of Sackville UK Property Select II (GP) No 1 Ltd & Another v Robertson Taylor Insurance Brokers Ltd & Another highlights the need for extreme care.

In this case, the tenant wanted to serve a break notice for a lease that was registered at the Land Registry. However, shortly before the notice was served, the lease was assigned from Robertson Taylor to Integro Insurance (on 29 March 2017). Registration of the transfer was effected at Land Registry on 7 July 2017. In the intervening period, solicitors served a break notice on behalf of Integro Insurance, purporting to exercise a break option in the lease.

Section 27(1) Land Registration Act 2002 states that a transfer of a registered estate does not operate in law until completed by registration. Often registration does not occur until some weeks, or sometimes even months, after the transfer has taken place. During that interim period the legal title is held on trust by the transferor for the transferee. The transferee’s interest in the property is an equitable one only, even though in practice the transferee will usually have gone into occupation and to all intents and purposes will consider itself as the owner.

This period of time is commonly referred to as ‘the registration gap’ and in practice this distinction between being the legal owner and being the equitable owner rarely causes a problem. Where it does tend to cause a problem though is where a notice needs to be served pursuant to a lease shortly after a lease (or the reversionary interest in a lease) has been transferred and before registration has taken place. Extra special care is required to ensure that the correct party is serving the notice and that it is being served on the correct party.

In the Sackville case, the court held that as at the date of notice the tenant was, legally, still Robertson Taylor. The legal title in the lease did not pass to Integro Insurance until registration of title on 7 July 2017.

The notice served by Integro Insurance prior to then was therefore invalid, meaning that the lease would continue until its contractual term date 2023.The fact that Robertson Taylor and Integro Insurance were group companies did not save the notice. The fact was that as at the date of the notice the legal tenant was still Robertson Taylor and it should have been that company that served the notice. Given that rent on the property is over £200,000 pa, this was an expensive mistake.

Key points

  • the importance of checking the registered titles when preparing notices
  • the need when acquiring a property to be mindful of whether there are any actions that you wish to take shortly thereafter that may be impacted by the registration gap. It is important that the conveyancer is aware of what you propose to do so as provision can be made
  • the registration gap can also cause problems following internal group company restructures
  • that it is just as important when disposing of as well as when acquiring a leasehold property to ensure the registration takes place as soon as possible. Until it does, the seller remains the legal landlord/tenant and therefore continues to be legally responsible for the lease obligations