Registration Gap - What is it and why is it causing problems

The ‘registration gap’ is the time between the completion of a property transaction and the transaction being registered at H M Land Registry. This gap in time means that the title entries at the Land Registry will not show the “up to date” ownership position.

Since the Covid-19 pandemic the time between completion and registration have been getting increasingly longer meaning that the ‘registration gap’ is leading to an increasing number of issues for clients.

Issues arise because legal title does not pass until registration has taken place. This means that in a purchase transaction the buyer does not become the legal owner until registration of their purchase has taken place. This leaves a timeframe (currently extending up to two years) where the buyer is an owner in equity only while the seller is still the legal owner.

The only exceptions to the passing of legal title on registration are where a lease is granted for a term of less than seven years or in relation to unregistered land. In these instances, the legal title to the estate passes at completion.

What impact does the registration gap have?

One key risk that the registration gap poses is that you are not dealing with the correct owner. If a party is relying solely on the information held at H M Land Registry, there is a chance that the information they are relying on is not correct and, they could be entering into a transaction with the wrong party.

This is particularly important if you are a tenant or landlord serving notices as a notice needs to be served on the legal owner. Sending the notice to the wrong party could deem it invalid. It is vital to ensure that notices are served on the correct party to ensure that the legal notice are served within the correct timeframes.

It is unlikely that lenders will release funds for a mortgage until the mortgagee is the registered proprietor of the property.

How to mitigate issues arising out of the registration gap?

The only way to solve this issue of the registration gap is to close the registration gap as confirmed in the Law Commission’s 2021 review of the Land Registration Act 2002. To close the gap, it would require more resource at H M Land Registry to ensure that the backlog does not continue to grow.

Until the gap has been closed, there are a number of ways we can mitigate the risk that the registration gap poses, these include being aware of the intentions for our clients property in the likely registration gap and drafting accordingly to protect those, ensuring we have priority searches so that we are certain our clients application has priority over any others submitted and responding to any correspondence from H M Land Registry as quickly as possible.

If you have any questions about the registration gap and how it could affect your property transaction, our Commercial Property Team is here to help. Contact us today to discuss your situation and ensure you have the right protections in place.

Call us on 01242 574244 or enquire online.