• news-banner

    Expert Insights

Q&A: Consequences of the registration gap

Question

I own commercial premises which were let to a company – CRS Co Ltd – on a lease of 10 years in 2015. The lease contains a personal right for CRS to bring it to an end on 30 June 2020 on six months’ notice. CRS assigned the lease to another company – LMC Co Ltd – earlier this year.

LMC is occupying the property and has paid the June and September quarters’ rent and service charge. This morning I received a notice terminating the lease on 30 June 2020, but served by CRS. Surely the notice cannot be valid?

Answer

The validity of the notice will depend on which company was the registered proprietor of the property at the Land Registry at the date the notice was given. If LMC has not registered the assignment of the lease to it, then CRS remains the legal owner of the property and can exercise the break notice.

Explanation

When registered freehold or leasehold land is transferred, the registration requirements under the Land Registration Act 2002 must be satisfied in order to vest the legal estate in the transferee or tenant.

In your case, this means that the transfer to LMC must be registered and noted on your title as landlord.

Until the assignment is registered, the transfer operates only in equity and the legal estate remains with CRS. The gap between the date of the deed of transfer/lease and the date that the legal estate vests in the transferee/tenant is known as the “registration gap”.

A break right contained in a lease can only be exercised by the registered legal owner of the interest.

In Brown & Root Technology Ltd and another v Sun Alliance and London Assurance Co [1997] 1 EGLR 39, the Court of Appeal decided that where the assignment had not been registered at the Land Registry the original tenant was entitled to exercise the break clause.

In the more recent case of Sackville UK Property Select II (GP) No 1 Ltd and another v Robertson Taylor Insurance Brokers Ltd and another [2018] EWHC 122 (Ch); [2018] EGLR 13, the unregistered assignee sought to get around the registration gap by arguing that – irrespective of the registration requirements – an assignee of a “new tenancy”, which would include the lease, was bound by the tenant covenants and entitled to the benefit of landlord covenants under the lease at the point of assignment under the provisions of the Landlord and Tenant (Covenants) Act 1995.

However, although the break clause could be viewed as a landlord’s covenant, because it obliged the landlord to treat the lease as ended, that obligation was only triggered once a valid break notice was served by “the Tenant”. In view of the lack of registration, “the Tenant” remained the original tenant.

So, if LMC has not registered the assignment at the Land Registry, the legal owner remains CRS and it is entitled to exercise a break notice which is personal to it.

Question

I have just acquired the freehold of a lock-up shop, which is subject to a lease. The tenant is in arrears of rent. One quarter’s arrears will have been due for more than six months before I am registered as proprietor at the Land Registry.

Can I preserve my position by serving a notice under section 17 of the Landlord and Tenant (Covenants) Act 1995 (the 1995 Act) on the tenant’s guarantor now?

Answer

The point remains undecided, but you probably can serve such a notice unilaterally.

Explanation

Provided that you applied to be registered within the two-month period required by section 6(1) of the Land Registration Act 2002, the transfer has taken effect in equity but will not vest the legal title in you until registration takes effect: section 27(1). Until registration, the legal owner holds the legal title on trust for the equitable owner: Rose v Watson [1864] 2 QB 90; Scribes West Ltd v Relsa Anstalt (No 3) [2005] 1 EGLR 22.

None of the recent cases on the registration gap have considered service of a notice under section 17 of the 1995 Act, and the Act itself is ambiguous.

Section 17(3) provides that a guarantor is not liable unless “the landlord” serves notice within six months of the rent claimed falling due. Section 28(1) defines “the landlord” generally as “the person for the time being entitled to the reversion”. Section 17(6) includes “any person who has a right to enforce payment” of rent within the definition of “landlord”. Section 3(3) says that where the landlord assigns his interest, the assignee is entitled to the benefit of the tenant’s covenants “as from the assignment”. “Assignment” includes an “equitable assignment”: section 28(1). So, a landlord whose title is not yet registered is “a person who has a right to enforce payment” of rent. Unfortunately, by section 28(4), any reference to the landlord refers to all persons who jointly constitute the landlord. If “the person for the time being entitled to the reversion” for the purposes of the definition of “landlord” in section 28(1) means the registered proprietor, entitled to the reversion in law, and the unregistered assignee, entitled to the reversion in equity, section 28(4) directs they must serve a section 17 notice jointly.

However, the better view is that section 17(6) expands the definition of “landlord” for the purposes of serving section 17 notices, thereby entitling “any person who has a right to enforce payment” to serve a notice. On that basis, a landlord by an assignment which has not yet been registered can unilaterally serve a section 17 notice, so you can seek to preserve your position now.


This article was written by  Louise Clark and Barrister Nic Taggart at Landmark Chambers and appeared on 10 December 2019 in Estates Gazette.

Our thinking

  • In-House Insights: Legal operations at work - how to do more with less

    Megan Paul

    Events

  • Syma Spanjers and Francesca Heath-Clarke write for People Management on tackling discrimination against young female workers

    Syma Spanjers

    In the Press

  • HR magazine quotes Isobel Goodman on second jobs and HR obligations

    Isobel Goodman

    In the Press

  • Cy-près engaged to revive the “spirit” of the long-forgotten “English Method”

    Jennifer Doggett

    Insights

  • Property Week quotes Lauren Fraser on the Supreme Court case of A1 Properties v Tudor Studios RTM

    In the Press

  • UK Government AI Regulation Response & Roadmap – Is the Government behind the wheel?

    Mark Bailey

    Insights

  • Noni Garratt-Wall takes part in interviews on our Firm's rebrand and marketing strategy

    In the Press

  • The Daily Telegraph quotes Nick Hurley on the surge of unexplained absences in the workplace

    Nick Hurley

    In the Press

  • Remote Hearings – factors to consider

    Richard Kiddell

    Insights

  • IR35 update: HMRC consultation on proposed mechanism for off-setting tax liabilities

    Hugh Gunson

    Insights

  • Richard Davies writes for City AM on the lessons that the Premier League can learn from the Super Bowl and NFL

    Richard Davies

    In the Press

  • “Lead Linings Playbook” – A relationship and divorce involving Narcissistic Personality Disorder

    Charlotte Posnansky

    Insights

  • The Evening Standard quotes Kelvin Tanner on the rush to complete Skilled Worker visa applications

    Kelvin Tanner

    In the Press

  • The ongoing fight against fakes

    Charlotte Duly

    Quick Reads

  • Are ‘no fault evictions’ to end this year?

    Samuel Lear

    Quick Reads

  • Sophie Rothwell writes for Law 360 on the Bullying and Respect at Work Bill

    Sophie Rothwell

    In the Press

  • Property Week quotes Samuel Lear on the Renter’s Reform Bill

    Samuel Lear

    In the Press

  • Charles Russell Speechlys advises Entrepreneurial Food Group on the sale of two food production businesses to The Compleat Food Group

    Hamish Perry

    News

  • The Global Legal Post quotes Mike Barrington on Tesco’s decision to sell its banking practice

    Mike Barrington

    In the Press

  • David Savage writes for Property Week on the case of Triathlon Homes vs Stratford Village Development Partnership and Get Living

    David Savage

    In the Press

  • Community Infrastructure Levy and common pitfalls

    Sadie Pitman

    Insights

  • UK tax considerations for US persons relocating to the UK

    Matthew Radcliffe

    Insights

  • Defects in Notices - the Supreme Court considered whether trivial mistakes are fatal

    Lauren Fraser

    Quick Reads

  • Planning essentials case update: when can an enforcement notice against an unlawful use also require the removal of related structures?

    Sadie Pitman

    Quick Reads

  • All Real Estate Disputes lawyers want for Christmas is...

    Samuel Lear

    Quick Reads

  • Deadline for responses to ground rent consultation extended until 17 January 2024

    Laura Bushaway

    Quick Reads

  • Court of Appeal Confirms that Property Guardians Occupied an HMO

    Christopher Gothard

    Quick Reads

  • The Levelling Up and Regeneration Act 2023 and Building Safety

    Oliver Park

    Quick Reads

  • Canary Wharf – A new life sciences and BTR hub?

    Marie Randall

    Quick Reads

  • Consultation on ground rents in existing residential long leases opens for 6 weeks

    Laura Bushaway

    Quick Reads

  • The King's Speech - Renters Reform

    Samuel Lear

    Quick Reads

  • King’s Speech: Developments on Leasehold and Commonhold Reform remain high on the Government’s agenda

    Laura Bushaway

    Quick Reads

  • Dubai Court of Cassation Extends Arbitration Agreement Across Subsequent Contracts

    Peter Smith

    Quick Reads

  • Good news for users of the Madrid System

    Charlotte Duly

    Quick Reads

  • Michael Gove's announcement on transitional period for two staircase requirement for new residential buildings

    Melanie Hardingham

    Quick Reads

  • Navratri at Charles Russell Speechlys

    Arjun Thakrar

    Quick Reads

  • Return to the full office week?

    Quick Reads

  • Skyscraper vs Groundscraper—The Legal Dynamics of Future Dense Cities

    James Souter

    Quick Reads

  • Planning essentials case update: Does your existing permission prevent you from relying on Class E?

    Sadie Pitman

    Quick Reads

  • Savills: Global logistics markets set to return to normality before year end

    Quick Reads

Back to top