The Legal and Practical Challenges of the Registration Gap

The registration gap is the period between the completion of a property transaction and the registration of that transaction at HM Land Registry. Legal title does not pass to the new owner until registration has been completed. This means that, during the registration gap, the purchaser has completed the transaction but is not yet registered as the legal owner of the property.

What Difficulties does the Registration Gap Cause?

This registration gap creates potential pitfalls for practitioners and their clients when dealing with property rights which require legal ownership. This affects not only the new property owners, but other parties who have an interest in the property such as commercial tenants. If the registration gap is not handled properly and correctly, then actions taken on behalf of clients may not be effective. 

The registration gap can cause difficulties for the purchaser of a property as well as tenants occupying a property. The service of notices by the new property owner and by the tenants of a property that has recently been sold, can only be served by or on the legal owner. 

For example, notices that require legal ownership such as a Break Notice or Notices to Quit must be served by or on the legal owner. In practice, what this can mean is that even though the purchaser of a property has completed on a transaction and ostensibly bought the property, the vendor remains the legal owner until the registration of the purchaser is completed at HM Land Registry.

This is problematic for new owners of property but also for tenants of a property that has recently been sold. Increasingly, we are seeing that commercial property is an asset which is invested in by large pension funds. Ownership of commercial property can change without notice.

Commercial tenants of property that has been sold without a lot of fanfare who want to serve Break Notices on the landlord or where the tenant seeks to assign the lease must be careful to investigate who the legal owner is to ensure that any notice served on the landlord is done so effectively.

In both cases, there is case law where Courts have decided that notices served by purchasers of property after the sale has completed but before the register at HM Land Registry has been updated are invalid. Likewise, notices served by tenants on the new purchaser of a property, before that purchaser has had their legal title registered at HM Land Registry have also been held to be invalid.

This is particularly problematic for Break Notices as the Break Notice must be exercised within a specified timeframe as potentially, if a Break Notice is served within this timeframe but on someone other than the legal owner, the Break Notice is likely to be ineffective and the opportunity to exercise the Break Notice may be lost.  

It is of crucial importance that the legal owner is established before serving notices on the landlord.

To address these challenges created by the registration gap, parties to any transaction relating to the property must take proactive steps to ensure that they are serving notices on or receiving notices from the correct legal owner.

Key Factors for Landlords and Tenants

• Property owners and tenants of commercial property that has recently been sold must be aware that the legal title does not pass to the new owner until the registration at HM Land Registry is completed.

• Notices requiring legal ownership must be served by the legal owner even if the equitable interest in the property has been acquired through a sale transaction to a new purchaser. 

• To mitigate the risks in serving notices on the wrong party or acting upon notices served by the wrong party, practitioners should on behalf of their clients consider contractual provisions, powers of attorney and pre-completion searches.

1. Contractual provisions: for example the sales contract can require a seller of the property to act on the buyer’s behalf during the registration gap such as serving notices at the buyer’s discretion.
2. Power of Attorney: This can be granted by the seller to the buyer for the duration of the registration gap and this can also help to address the issues caused by the registration gap.
3. Pre-completion searches: These searches and priority notices can help protect the buyer’s interest during the registration gap. Specifically, pre completion searches and priority periods can prevent third-party claims or changes to the Land Register during the registration gap. This is increasingly important if there is a long registration delay.

• By taking these steps, the adverse effects of the registration gap can be minimised to ensure smoother transactions and greater legal certainty. 

How Pinney Talfourd can help

At Pinney Talfourd, our Property Disputes team works closely with our Commercial Property team to ensure that any notices served during the registration gap are served on the correct legal owner.

If you need advice regarding the registration gap, the service of notices or a commercial property dispute, contact your local office on 0800 011 1195 or email .