Maq Masi Blog

In commercial property transactions, the title registration process is critical for establishing ownership and ensuring legal security for all parties involved. Recently, I faced a situation where I purchased a commercial property (a shop), and when I sought to rent it out for a 4-year lease, the tenant’s solicitor raised concerns about the property’s title registration, which was still pending. This situation brings to light key legal implications and solutions that both property owners and tenants should consider when dealing with pending title registrations, particularly with short-term leases and the issue of tenant trust in the absence of a registered title.

The Title Registration Process

When you purchase a property, whether residential or commercial, it must be registered with HM Land Registry to officially record the transfer of ownership. This registration provides legal proof of ownership, protects your interest in the property, and is often necessary for transactions involving mortgages, sales, or leases.

In the case of short-term leases (under 7 years), there is no legal obligation to register the lease with HM Land Registry. However, for tenants, this can present a challenge. If the title to the property is not registered yet, tenants may be hesitant to trust the landlord, as they have no official proof that the landlord truly owns the property. This can complicate lease negotiations, especially if the tenant’s solicitor demands confirmation of ownership before agreeing to the lease terms.

How Can Tenants Trust the Landlord Without a Registered Title?

Without a registered title, it can be difficult for the tenant to verify that the landlord indeed owns the property. The tenant’s solicitor may raise concerns about the risk of entering into a lease agreement with someone who cannot provide immediate proof of ownership. However, there are several ways this issue can be mitigated:

1. Solicitor’s Undertaking: A common solution is for the landlord’s solicitor to provide an undertaking, guaranteeing that the title registration process is underway and that the landlord is the legitimate owner of the property. This can offer a level of assurance to the tenant while the title is still pending.

2. Evidence of Ownership: The landlord can provide alternative proof of ownership, such as a certified copy of the purchase contract or confirmation from HM Land Registry that the application for title registration has been submitted and is in progress. Although not as definitive as a registered title, this can offer reassurance that the landlord does indeed own the property.

3. Searches and Enquiries: The tenant’s solicitor can perform a search on the property with HM Land Registry to confirm that an application for registration has been lodged. HM Land Registry provides legal protection from the moment they receive the application, even if the registration itself is pending. This means that while the official title may not yet be registered, the tenant’s legal rights will be protected from the date of application.

4. Indemnity Insurance: To further safeguard against potential risks, the tenant can request indemnity insurance, which protects them financially in case there are any disputes or issues with ownership. This can provide peace of mind while the title registration is being processed.

Legal Implications for Unregistered Short-Term Leases

If the lease is for less than 7 years, the landlord is not legally required to register it. However, this presents certain legal and practical considerations for both the landlord and the tenant:

1. Uncertainty for the Tenant: Without registering the lease, the tenant’s interest is not recorded on the property’s title. This could make it difficult for the tenant to prove their rights if the landlord decides to sell, mortgage, or transfer the property during the lease period.

2. No Protection from Third-Party Interests: If the lease is unregistered and the landlord sells the property, the new owner may not be bound by the tenant’s lease unless it is mentioned in the sale agreement. This exposes the tenant to potential eviction or renegotiation of terms with the new owner.

3. Practical Considerations: Although not mandatory, registering the lease can help protect the tenant’s interest, especially if the landlord plans to sell the property during the lease term. Tenants may request a restriction on the title to ensure that any future buyer is aware of the lease.

Requisitions and Complex Applications

Delays in title registration can be further complicated by requisitions from HM Land Registry, which are requests for additional information or clarification. These delays often occur in more complex transactions, such as first-time registrations, multi-title properties, or new leases. Between 55% to 65% of these complex applications require additional clarification or documents, which significantly extends processing times .

If the seller’s solicitor is slow to respond to requisitions, the registration process can come to a halt, leaving the tenant uncertain about the landlord’s legal ownership and delaying lease execution.

Expediting the Registration Process

To avoid delays and build trust with the tenant, the landlord can expedite the registration process. HM Land Registry offers a free fast-track service (expedite) for cases where a delay in registration could cause significant financial or legal issues. Over 95% of expedited applications are processed within 10 working days, offering a quick solution when time is of the essence .

Alternatives and Solutions

While waiting for the title registration to be completed, there are a few alternatives and solutions that can be explored:

1. Agreement of Lease Subject to Registration: You can negotiate a clause in the lease that makes the lease conditional upon the eventual registration of the title. This would allow the tenant to occupy the property while ensuring that once registration is completed, all formalities will be met.

2. Temporary Licence to Occupy: If registration is delayed, the landlord can grant the tenant a temporary licence to occupy the premises. This provides a short-term solution, allowing the tenant to use the property while the registration is finalized.

3. Indemnity Insurance: In some cases, tenants can request indemnity insurance to protect against potential risks associated with a pending or unregistered title.

Conclusion

Title registration delays, especially those caused by requisitions or other issues, can create uncertainty for tenants who may doubt the landlord’s ownership of the property. However, there are ways to build trust, such as providing solicitor undertakings, performing searches with HM Land Registry, or obtaining indemnity insurance. For short-term leases under 7 years, while registration is not required, landlords and tenants should still ensure that their legal interests are protected through robust contracts or registering the lease voluntarily.

For property owners in situations like mine, it is important to work closely with a solicitor to ensure that the title registration process is managed efficiently and that tenants have confidence in the landlord’s ownership rights.

Disclaimer:

This article is for informational purposes only and does not constitute legal advice. While efforts have been made to ensure the accuracy of the information, readers should seek professional legal advice tailored to their specific circumstances before making any decisions based on the content of this article.

Sources:

1. HM Land Registry – Title Registration Process and Timelines: GOV.UK

2. HM Land Registry: Processing Times: GOV.UK

3. My New Property is Not Registered Yet: HM Land Registry Blog

4. Legal Issues Around Title Registration and Leasing: Lexology

5. Expediting Title Registration – HM Land Registry’s Guidance: HM Land Registry

6. Short-Term Lease Registration Requirements: Practical Law

7. Property Not Registered with HM Land Registry after 16 months? Article on delayed registration

8. Temporary Licences vs. Leases: LawBite

9. Indemnity Insurance and Title Registration: Practical Law