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Commercial Property - The Registration Gap

View profile for Gillian Smith
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The Registration Gap - What is it and how might it affect you?

Many of you will not be aware of this term; however you will most likely be aware following completion of your property purchase or grant of a lease your solicitor will be dealing with registration requirements at the Land Registry. 
Whilst you will of course want your name registered on the title, are you aware of the implications which may arise during the gap between completion of your transaction and completion of the registration formalities at the Land Registry. This is called the 'registration gap'.
The 'registration gap' is the period of time between completion and registration at the Land Registry. The registration gap can vary significantly depending on your transaction; this can be a few weeks to several months. 
There will always be a period of time where the new owner will not be registered. 
During the 'registration gap' the new owner merely owns the beneficial interest to the property; the legal ownership does not transfer to the new owner until registration has been completed. 
What is the difference between a beneficial owner and a legal owner?  The difference is that the legal owner has been registered as the proprietor at the Land Registry; the beneficial owner has the benefit of the land during the 'registration gap' and has 'owner's powers' but has yet to become the legal owner. There are certain things that can be done only by the legal owner, which means that the beneficial owner's powers of disposition under general law are limited. 
How might you affected by the 'registration gap'?
In most cases the 'registration gap' will cause no issues however you should carefully consider this point particularly if you are considering serving a notice on your Landlord or Tenant. 
Break notice – as a Tenant could your break notice be invalid due to the 'registration gap'?
In the recent case of Sackville [2018] a lease was assigned to a new tenant; however the registration of the assignment was delayed. During the registration gap the new tenant served a break notice on the Landlord. The Landlord argued that as the registration of the assignment had not yet been completed at the Land Registry then the notice should have been served by the Tenant who still held the legal title to the property. The court agreed with the Landlord and the break notice was held to be invalid. 
As a Landlord you may want to serve a section 25 notice to terminate a business tenancy, this can only be done by the legal owner. So if a landlord sells the property, then the new landlord cannot serve the section 25 notice until the registration has been completed at the Land Registry. 
As a tenant you may want to serve a section 26 notice to terminate a business tenancy. Where the Tenant has assigned the lease, any notice will need to be served by the tenant who holds the legal title. The notice also needs to be served upon to the landlord who holds the legal title. 
Where the notices are served on or by the parties who do not hold the legal title then the notice will be ineffective. 
If you have any questions about the content of this article please contact one of the team in our Commercial Property Department.