Please mind the ‘registration gap’

The ‘registration gap’ is not a new issue, but huge backlogs at the Land Registry means it is becoming more of a problem that buyers need to be aware of as it can have serious consequences.

Lauren Hutchinson, associate in Lodders’ Property Dispute Resolution team, highlights some of the potentially serious consequences of dealing with property before you have been registered as the owner on the Land Registry.

What is the ‘registration gap’?

The registration gap arises under Section 27 of the Land Registration Act 2002. It refers to the period in a property transaction between the date a buyer and a seller complete the sale and purchase of a property, and the date the buyer is registered as owner of the property at the Land Registry. It also refers to the period in a transaction between the date a lease is completed and the date the lease is registered at the Land Registry.

During this time, the seller holds the ‘legal estate’ in the property on trust for the buyer, while the buyer only has a ‘beneficial interest’ in the property.

Legal estate: Legal estate or ownership reflects who is responsible for the land/property. The parties registered at the Land Registry are the legal owners.

Beneficial interest: A beneficial interest is a right to the benefit of the property.

It is a common myth that the person who owns the legal estate has unlimited power to deal with the property. In fact, the person with the beneficial interest may have the right to any income from the property, as well as the rights to the proceeds of any sale. However, until you are registered as the owner at the Land Registry, you cannot deal with the property in the same way as the person with the legal estate.

The Land Registry: timeframes

The longer the delay before an application for registration is made, the longer the time that the legal estate will remain with the seller. However, the more serious delay is due to considerable backlogs at the Land Registry.

The Land Registry’s published processing timeframes, as at 25 October 2023, were:

• For first registration: The earliest timeframe is 4 to 12 months, with the average being 13-16 months with almost all applications being completed in 14 to 16 months.
• For transfer of part and registering a new lease: The earliest is 8 to 14 months, the average is 15-17 months and almost all applications are dealt with by 21-24 months.
• For property transfers: The earliest is 1 day, the average is 2 to 25 days with almost all having been processed by 6 to 12 weeks. The more complex matters are taking almost 7 to 9 months to complete.

Consequences of the registration gap

This registration gap can create significant legal and practical challenges for all parties involved in the transaction. This includes:

• Legal notices: Generally speaking, notices must be given to or by the legal owner of the property. During the registration gap, that will be the seller or the previous landlord. Your dealings in connection with the property as a new owner will therefore be limited until you are registered as the legal owner. This could affect your ability to serve notices, for example, in respect of lease renewals.
• Loss of priority: A priority search is undertaken at the Land Registry, usually after exchange of contracts. The search ensures that no changes can be made to the title deeds whilst the priority is in place. The priority is valid for a period of 30 days and must be renewed before expiry if you are still waiting to become the registered owner. If you do not renew the search, you would lose priority at the Land Registry and another party could, for example, register a charge against the property which would bind you as the subsequent owner.
• Deduction of title issues: If you are dealing with development land, you may find that statutory undertakers require evidence of legal title before they enter into negotiations, so key development deadlines could be missed.
• Enforcement of covenants: If you wish to take action for breach of covenant, the registered legal owner must be party to the action, so the cost of enforcement may not just be your legal costs, but their legal costs as well.

Practical takeaways

The key point to remember is to check titles carefully. If you obtain a property title that still lists the previous owner as the legal owner and, for example, you need to serve notices in respect of that property you may need to serve notices on several parties to ensure the notices are valid. If you do find yourself in this position you should take specialist legal advice.

Dispute resolution experts

Lodders’ dispute resolution solicitors work tirelessly on behalf of our clients, finding a speedy and effective solution to their issues. For further information on the registration gap or help with your property transaction, please get in touch.