The importance of registering a property lease

Reanne Upton, Associate in the our property disputes team, urges landlords and tenants to make registering leases with Land Registry a top priority.

Pursuant to the Land Registration Act 2002, leases granted on or after October 13 2003  for a term of more than seven years, or with at least seven years of its term left to run (if granted pre October 13 2003), are registerable at the Land Registry.

However, the reality is that not all such leases are registered, especially where solicitors are not involved in the completion process.

Whether it be an innocent mistake, that task that repeatedly gets put to the bottom of the to-do list or is deliberately dismissed as being ‘another unnecessary formality’, many landlords and tenants underestimate the importance of registration and fail to foresee the potential adverse effects it can have down the line. For example:

• Most modern leases contain a covenant that requires the lease to be registered by the tenant within a specific timescale of it completing. Failing to register the lease in accordance with its terms will amount to a breach of covenant which in turn can have detrimental consequences for both the tenant and the landlord.

• Other terms of the lease such as the guarantor covenants may not be enforceable unless or until the lease is registered.

• The registration of a lease constitutes as notice to the wider world of a tenant’s interest in that particular land. The absences of registration results in the absence of such notice thus casting uncertainty upon a tenant’s interest in that land, its right to occupy the same and the ability for the lease to operate at law. This can cause considerable problems for both a landlord and tenant if/when it comes to the parent title being sold or a mortgagee taking possession.

• Stamp Duty Land Tax implications will be triggered upon registration of a lease. Failing to register a lease may cause such payments to be missed resulting in consequential penalties and interest chargeable on late payments.

• Issues can also arise where the unregistered lease need to be terminated early due to its status in law and equity differing.

All of the above can be circumvented by prioritising the registration of a lease as soon as it completes or as soon as you become aware of its unregistered status.

If this article encourages one thing it would be for any prudent landlord and/or tenant to undertake a quick review of its lease(s), ensure they are registered and arrange for this to be done forthwith if not.