The decision in Brown & Root Technology Ltd v Sun Alliance & London Assurance Co Ltd [1997] 1 EGLR 39; [1997] 18 EG 123 confirmed that, under the land registration regime, a transfer operates as an equitable assignment until it has been registered at the Land Registry. In other words, there a “registration gap”, during which the transferor remains the legal owner of the estate transferred. This causes difficulties if notices need to be served when a leasehold interest, or reversion, changes hands.
It was hoped that electronic conveyancing would provide the answer. However, the Law Commission noted recently that the registration gap has been lengthening, not shortening. Stodday Land Ltd v William Marsland Pye [2016] EWHC 2454 (Ch) alerts us, once again, to the problems that this can cause.
The litigation concerned the validity of a notice to quit served on a longstanding agricultural tenant. The tenant challenged the notice on the ground that there had been a change in the ownership of the reversionary interest and that the incoming landlord had served a notice to quit before being registered at the Land Registry.
The judge noted that “where a legal right to bring a tenancy to an end by notice to the tenant is being exercised, then it is the person in whom the reversionary estate is vested who must give the notice”. The landlord argued unsuccessfully that this did not apply to agricultural holdings or, alternatively, did not recognise the serious problems caused by the registration gap and had been overtaken by developments in the law.
The landlord relied on section 141 of the Law of Property Act 1925. This provides that the benefit of every covenant or provision in a lease and “every condition of re-entry and other condition” therein contained “shall be annexed and incident to and shall go with the reversionary estate in the land” and “shall be capable of being… enforced and taken advantage of, by the person from time to time entitled … to the income of the whole or any part, as the case may require, of the land leased”. However, the judge rejected the landlord’s argument on the ground that the right to serve a notice to quit did not arise as a result of any contractual provision in the tenancy agreement.
The judge was attracted by, but rejected, the argument that the incoming landlord was entitled to be registered as a proprietor and was, as a result, entitled to exercise owner’s powers under section 24 of the Land Registration Act 2002. Owner’s powers are not automatically to be equated with those of a registered proprietor: Skelwith (Leisure) Ltd v Armstrong [2015] EWHC 2830 (Ch); [2015] PLSCS 286. The power in question must also be exercisable under “the general law”. And, since the law requires legal owners to give notices to quit, the ownership of the equitable title did not suffice for the service of an effective notice, and the subsequent acquisition of the legal estate did not validate the notice retrospectively.
Incoming landlords can avoid such problems by extracting powers of attorney from sellers, so that they can serve notices and take other steps in the seller’s name. Incoming landlords can also impose obligations on sellers requiring them to pass on any notices, to act in accordance with their directions, and not to exercise rights under occupational leases themselves.
Allyson Colby is a property law consultant
