By Sophie Darwish

What is the registration gap?
After a commercial property transaction has completed, it will take some time for the property transfer to be registered at the Land Registry. It is not unusual for Land Registry applications to take over 6 months to be completed. The delay between the date of completion of the purchase and the registration at Land Registry is known as the ‘registration gap’. Once a buyer’s application has completed at the Land Registry, the registration date will be backdated to the date of the application.

The risk caused by the registration gap
Until the transaction has been registered and the title documents have been updated, the legal title to the property remains with the seller and the buyer is an owner in equity only. This creates a risk for the buyer, especially if the property is subject to occupational tenancies.

Where the property is subject to tenancies, the buyer will be at risk if a legal title owner is required to serve statutory notices upon sitting tenants. For example, a section 17 notice is served on a tenant to recover any arrears, however the Landlord and Tenant (Covenants) Act 1995 is ambiguous on whether a notice served by an owner in equity will be valid. The buyer will also be unable to exercise a break right prior to registration. Such issues could become magnified if the seller is an insolvent company moving to dissolution.

Issues can also arise if the sale of the property is linked to a later transaction, such as a refinancing deal or a development, as the registration gap could cause significant delays.

Practical steps

To reduce the buyer’s risk, the registration gap should be minimised as much as possible and, where necessary, steps should be taken to give some protection to the buyer.

1. Priority Searches
   If other applications are made in front of the buyer’s application, the buyer will have to wait until these have completed before their application can progress. A priority search, referred to as an OS1 or OS2, gives the buyer’s application priority over any applications submitted for 30 days. A priority search should be carried out before completion, and renewed if it expires before the application to register the purchase is completed. This is especially important if multiple applications relating to the same property are expected.
2. Submitting the application
   The sooner the application is submitted to the Land Registry, the sooner it will complete. If the registration gap is likely to cause issues, the buyer should ensure that its solicitor has any consents required prior to completion and the Land Registry forms in draft ready to submit with the application.
   If there is any information missing, the Land Registry will request this in the form of a requisition. Requisitions will lengthen the registration gap, and therefore care should be taken to ensure that applications contain all relevant information. If any requisitions are received, they should be responded to promptly.
3. Expediting the application
   If there is another transaction related to the sale, the buyer’s solicitor can make a request to expedite (fast-track) the application. To expedite the application, the buyer will need to provide evidence that the registration delay will either cause problems not related to a land transaction, or that it will put a property sale or other property transaction at risk.
   If the application is expedited, the Land Registry will aim to process this within 10 working days (subject to any requisitions or other outstanding applications).
4. Incorporating terms into the sale contract
   To reduce the risk caused by the registration gap, clauses can be incorporated into the sale contract to appoint the buyer of the property as the seller’s agent while the application is processing. This would grant the buyer the ability to serve notices, commence proceedings and take any other necessary action in relation to tenants on the property during the registration gap.
   Wording will also typically be included so that, if the buyer does take any action during the registration gap, they will be required to indemnify the seller against any matters arising from this.

If you would like any further guidance in respect of the registration gap or any other commercial real estate matters, do please get in touch with one of the Commercial Property Team.