A recent case of Stodday Land Limited and Ripway Properties Limited v William Marsland Pye serves as a reminder of potential issues that the ‘registration gap’ could pose for potential buyers of a property subject to a lease.
It would not be surprising for a buyer of land to believe that he becomes the legal owner of the purchased land from the moment the purchase has completed and the money has been paid to the seller. However, until the registration of the buyer’s application to be registered as the owner of the property is complete, the buyer will be merely a “beneficial” owner of the property rather than the “legal” owner – i.e. he has the right to say he owns the property but he is not the formally registered proprietor of the property. The Land Registry can take several months to deal with the registration of such applications and the gap between the completion date and the registration is commonly known as the ‘registration gap’.
Section 27 and Schedule 2 of the Land Registration Act 2002 gives the buyer the right to deal with the property during the registration gap. The problem arises when the buyer tries to deal with certain matters that are reserved for the legal owner of the property.
The case of Stodday Land Limited and Ripway Properties Limited v William Marsland concerned a buyer of a property with an agricultural tenant. Most of the land was sold to the new owner on 19 June 2013 but it was not registered by the Land Registry until 16 July 2013. During that period, the new landlord served a notice to quit on the tenant. In his High Court ruling, Mr Justice Norris found the notice to be invalid as the buyer was not the legal owner of the property at the time the notice was served.
The judgement should serve as a warning to prospective buyers who want to deal with the property during the registration gap and do not want to rely on the Land Registry’s promptness in dealing with the registration.
Buyers should include special provisions in the contract allowing them to serve notices to quit during the registration gap or to oblige the seller to do so at their direction. The seller will most likely require the buyer to indemnify him for the costs incurred in dealing with any issues during the registration gap, but this seems like a small price to pay in the light of the potential repercussions of not ensuring that this form of protection is provided for under the contract.
In light of this development, it is therefore vital that the Land Registry and correspondence titles are kept up to date. Freeths’ lawyers are aware of the importance of conducting proper due diligence, including the identity and status of all parties, prior to serving notices to quit in order to avoid one of the common pitfalls encountered during the registration gap and would be delighted to assist clients in reviewing title numbers and ensuring that the registered addresses are current.