How to mitigate risks associated with the Registration Gap

read time: 3 mins

The time period between completion of a real estate transaction and its registration at HM Land Registry, known as the ‘registration gap’, can cause costly practical issues. We look at some of the steps property lawyers can take to mitigate the associated risks.

Is your property deal really “complete”?

The most time-consuming and complex aspects of real estate transactions are usually due diligence and the negotiation of transactional documents. However, all this good work can unravel if the correct post completion procedure is not followed.

Where registration at HM Land Registry is required (which is in the majority of cases), the legal interest in a property only vests in the buyer or tenant once it is registered; until then, the buyer only acquires an equitable interest. Consequently, a registrable property transaction is never truly ‘complete’ until registration has been finalised.

The time period between completion and registration, known as the ‘registration gap’, can cause costly practical issues, especially now that we are seeing estimated timescales for completion of registration of upwards of a year. For example:

  • Legal Notices - Generally, notices must be given by the legal owner of the property. During the registration gap, that will be the seller or the previous landlord, meaning your dealings in connection with the property as a new owner will be limited.
  • Loss of Priority - If you lose priority at HM Land Registry and a subsequent application completes ahead of yours, this application may prejudice yours.
  • 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.

How can you ensure that your company’s real estate assets are protected from the impacts of the registration gap?

  • Drafting – It is vital to think ahead. Think about what you are intending to do with the property and include appropriate provisions in the transactional documents. For example, you can appoint the seller as agent for the buyer to overcome the issue of validity of notices, or require a seller to enter into agreements on your behalf during the registration gap.
  • Priority Searches - Ensure that your priority period is protected by correctly submitting official searches (OS1/OS2) before completion, so that your application has precedence over later applications at HM Land Registry.
  • Being pro-active with HM Land Registry - With the continuing digitalisation of land registration services, it is becoming easier to keep track of applications and respond to requisitions as they arise, request an update or expedite an application, in order to minimise the registration gap.

Your company’s most valuable assets are at risk until its legal interest is perfected by registration. Property law specialists can help protect your company’s position by mitigating the risks posed by the registration gap as far as possible, in both the drafting of the documents during the course of the transaction and in dealing with HM Land Registry post-completion.

For more information, please contact Tamara Paul or Emily Jeffrey in our Real Estate team.

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