Section 27(1) of the Land Registration Act 2002 provides that a disposition of a registered estate does not operate at law until it is completed by registration. In other words, there is a “registration gap”, during which the disponor remains the legal owner of the estate transferred. The consequences of overlooking the effects of this statutory provision can be devastating.
Sackville Property Select II (GP) No 1 Ltd v Robertson Taylor Insurance Brokers Ltd [2018] EWHC 122 (Ch); [2018] PLSCS 19 concerned the validity of a break notice. The lease in question had been granted five years previously, for a term of 10 years, in return for an annual rent of £219,575 (subject to review). The lease had been assigned to another company within the group, which then served a notice purporting to terminate the lease on the break date. Unfortunately, however, it did so before applying to be registered with title to the lease, thereby enabling the landlord to argue that the break notice was invalid because it was served by the beneficial owner, and not by the legal owner of the lease.
The solicitor who served the break notice admitted that he had assumed that the lease was unregistered. However, the assignee pointed to a clause in the lease stating that the expression “the Tenant” included the tenant’s successors in title and tried to persuade the court that the notice was valid. Alternatively, it claimed that the landlord was aware of the group relationship and knew that the assignor and the assignee used the same firm of solicitors. It claimed that its solicitors were authorised to serve the notice in the name of whichever party needed to be named in the break notice in order to validate it, and tried to persuade the court that the notice had been given for and on behalf of the assignor.
Dealing first with the question of the name in which the notice should have been served, Mr Justice Fancourt ruled that the notice should have been given by the legal owner of the lease. Instead, the notice had been given by the equitable assignee – who did not qualify as a successor in title before being registered as the proprietor. So the notice was ineffective. Furthermore, on the evidence before the court, it was not arguable that the assignee had intended to serve the break notice on behalf of the assignor – which put paid to the argument that the assignee had acted as the assignor’s agent.
Would a reasonable recipient of the notice have realised that the assignee’s name had appeared in the notice by mistake? The judge ruled against the assignee on this point too. A reasonable recipient would have been aware that the assignee had executed a licence to assign in which it had covenanted to apply for registration within ten business days of the assignment. The recipient would have assumed that the assignee had complied with that obligation and that it had been registered as the proprietor of the lease, making it the right person to serve the break notice. In these circumstances, the recipient of the notice would have been most unlikely to understand that the notice was meant to have been given by the assignor and that the name of the assignee appeared by mistake.
Allyson Colby, property law consultant
