Mind the Registration Gap

Yesterday, Cooke J delivered her judgement on R M Residential Ltd (RM) v Westcare Estates Ltd. & Another, a decision that provides common sense clarification of this concern.

As everyone knows, there are two stages in the sale of land. Most know that exchange of contracts is the point of no return but does not pass legal title. However, fewer understand that legal title does not then pass on completion. The sale has then to be perfected by a third stage - registration. There is, thus, a ghostly hiatus of indeterminate length between completion and registration where a buyer's status is murky - the so called registration gap.

In this case, RM bought the freehold of a property part vacant and part occupied by long leaseholders. Following completion, but before registration, they barged headlong into major works. RM then sought to retrospectively dispense with their leasehold consultation obligations and the issue went to the First-tier Tribunal (FTT).

No, said the FTT. You were not registered and so were not legal owner. You had no right to do the work, serve the statutory notice, or commence the application to the FTT without the seller's permission. The matter went on appeal to the Upper Tribunal where Cooke J considered that to be a wrong interpretation.

During the gap the seller held the legal title on bare trust for RM. As a bare trustee, the seller had no power to make decisions about the property and could only act at the direction of RM. Meanwhile, RM was equitable owner. Its rights had limitations; but not ones relevant here.

Of relevance was their right to enter the vacant ground floor, take on all the landlord’s obligations to maintain the let units, and enjoy the benefit of the leaseholders' covenants to indemnify that cost through the service charge. It follows that they had a right to do the works and seek dispensation of the consultation requirement.

I can see why the FTT decided as they did. The requirement to register is mandatory. Parties cannot simply ignore what Parliament has imposed. But this was not a case of RM ignoring their statutory obligation; more one of RM acting too soon but, nevertheless, consistent with their new status as owner and landlord.

Luke Weldon is a Partner at Carbon Law Partners specialising in real estate and commercial issues. You can contact him on [email protected] or 07816 755 372.