In England and Wales, most property notices can only be served by, or upon, the legal owner of the property in question. However, legal title does not pass to a buyer as soon as a sale completes. Instead, a buyer will only become the legal owner when the transaction is registered at the Land Registry. At the moment, transactions are taking several months to register, with some complex transactions taking over a year. So where does that leave the buyer?
The period of time between completion of a transaction and its registration at the Land Registry is known as the "registration gap". It creates a significant headache for purchasers, particularly those wishing to serve notices on tenants.
Many common notices that landlords of multi-let buildings will wish to serve as part of their ordinary asset management, such as break notices and notices under the Landlord and Tenant Act 1954, can only be served by the legal owner – i.e. the seller during the registration gap. If lease renewal proceedings need to be issued, they must be commenced by, or against, the legal owner. Equally, notices sent by tenants must be served on the legal owner. That exposes a buyer to the risk that it will miss notices as there is no requirement for a copy to be sent to them. In the case of counter-notices following service of a s.26 request pursuant to the Act, for example, that could be disastrous.
For an example of how this can play out in practice, please see the blog here on our case in the High Court involving this very issue.
To avoid the problem in the first place, it is essential for the sale contract to contain provisions that:
- Require the seller to pass on copies of any notices received from any tenants promptly;
- Appoint the buyer to act as the seller's agent to allow it to service notices and commence proceedings in relation to the property until formally registered;
- As an alternative to an agency appoint, require the seller to serve any notices or take any action that only the legal owner of the property can take (including issuing lease renewal Court proceedings), at the direction of the buyer; and
- Deal with how the costs of any action taken by the seller should be dealt with.
Landlords and tenants wishing to serve property notices should always ensure that they are served by, or on, the correct entity. As the above makes clear, that is especially the case if the property has recently been sold.
If you are a commercial landlord or tenant wishing to serve any property notices or you have any queries about how these issues may impact you or your business, please do not hesitate to get in touch with the Real Estate Disputes team or your usual Brodies' contact.