Mind the gap
Author: James Benedick and Michael Callaghan
Applies to: England and Wales
The recent case of Stodday Land Limited and Ripway Properties Limited v William Marsland Pye is a reminder of the problems that the 'registration gap' causes in relation to land ownership.
A buyer of land might reasonably believe that it becomes the legal owner of that land from the date that it completes the purchase and pays the money to the seller. This is not the case. Until the buyer's application to be registered as the owner of the land has been completed, it is not treated as the legal owner of the property. It can take several months for the Land Registry to complete the registration process. This leads to a gap, known as the registration gap, where the buyer is, for most purposes, treated as the owner of the property without having legal title to it.
In most cases, the registration gap does not create problems for the buyer. The Land Registration Act 2002 gives the buyer the power to deal with the property during the registration gap. However, there are certain things that can be done only by the legal owner of the property. This is where the problems arise.
In Brown & Root Technology v Sun Alliance and London Assurance Co (1997), a lease was assigned but the new owner failed to apply to register the lease. This meant that the former tenant was still the legal owner of it and was able to exercise a break clause in the lease even though the right to exercise the break was said to end on the assignment of the lease. The assignment had not taken place in law because the new owner of the lease was not registered at the Land Registry.
In Stodday Land Limited and Ripway Properties Limited v William Marsland a buyer of a property served a notice to quit on an agricultural tenant but at the time the notice was served, the buyer was not the registered owner of the property. The court held that the notice to quit was invalid as the buyer was not the legal owner of the land when it served the notice.
What can buyers do to protect themselves? Contracts for the sale of land usually contain provisions to protect the seller. They require the buyer to apply to register themselves as owner of the property. However, these provisions do not protect a buyer who wants to exercise its rights as legal owner of the property and even a speedy Land Registry application does not provide an answer. In the Stodday Land case, the buyer complete the purchase on 19 June. An application was made to the Land Registry to register the buyer as owner of the land and that was dealt with by the Land Registry on 16 July. The notice to quit was served on 1 July.
Buyers who want to deal with property during the registration gap are best advised to include additional provisions in the contract that allow the buyer (as the seller's agent) to serve notices and take any other steps reasonably required by it during the registration gap or to require the seller to do so at its direction. This will enable the buyer to ensure that, where something has to be done by the legal owner of the property, it can be done as the buyer wishes. So long as the buyer agrees to pay the seller's costs and indemnify the seller against any liability incurred by the seller, the seller should not object the contract containing this necessary form of protection.
This document is for informational purposes only and does not constitute legal advice. It is recommended that specific professional advice is sought before acting on any of the information given.