When a commercial property goes to market, everyone wants the same thing: a smooth, efficient transaction with no last minute surprises. One aspect of a sale transaction that can be handled early on is ensuring that the registered title to the property is fully up to date. Whilst the core information will have been checked on acquisition, the seller may have held the property for many years and things may have changed. Ensuring that the Land Register / Land Registry title disclosed to a prospective purchaser is up to date and error free should reduce the number of due diligence queries raised on it. Here we look at the key considerations for that, both north and south of the border.
What title information may have changed?
During a seller’s ownership, the following events may have occurred, meaning the title issued to the seller on its acquisition of the property may no longer reflect the position at sale:
- if the seller is a company, it may have changed its name;
- the seller may have sold off part of the property;
- the seller may have granted, or released, fixed charges (known in Scotland as standard securities) over the property;
- the seller may have granted registrable leases, or such leases which were in place on acquisition may have since expired; and
- the seller may have granted other rights over the property, for example a right of access to an adjoining owner or the right for a utility provider to run pipes etc. beneath the property.
It will usually be for the buyer, creditor, tenant, utility provider etc to register the deed in their favour against the seller’s title. It is always prudent, therefore, to begin a sale transaction by downloading a fresh copy of the seller’s title and checking to ensure that all relevant deeds are showing. This should then be checked for any updates required.
How does the seller tidy up the title for sale?
Scotland
Where there has been, for instance, a change of the seller’s name or other details, or leases have come to an end, the seller’s solicitors can contact Registers of Scotland to have the title sheet updated. These are generally known as administrative corrections and Registers of Scotland can usually correct the title sheet on request by the owner (or its solicitors), or by the owner (or its solicitors) submitting an application to rectify the register. These are typically quick and straightforward applications.
In other cases, the seller’s solicitors can request that Registers of Scotland expedite a Land Register application that has not yet been completed. Evidence must be provided that the seller anticipates the loss of the sale if registration is not expedited. If this evidence is accepted, an updated title sheet will be issued more quickly than would ordinarily be the case. If this evidence is not accepted, the seller should include copies of all deeds that are still undergoing registration within the title pack to be read in conjunction with the seller’s registered title.
England & Wales
The seller’s solicitors can submit an electronic application known as an e-AP1 to the Land Registry to change the register. They might, for example, apply to:
- update the seller’s details;
- close a leasehold title which relates to a lease which has now expired and remove references to that lease from the seller’s freehold title; or
- cancel notices pertaining to shorter leases (or other agreements) which have been added to the seller’s title to protect an interest but which are no longer required.
There is also a similar process to that in Scotland whereby the seller’s solicitors can request that the Land Registry expedite a pending application. Evidence must be provided that the delay in registration is impacting another transaction or causing hardship. Each request is considered on a case-by-case basis.
Why timing matters
Depending on the exact update required, tidying up the title may take anywhere from a few days to several months. If these issues only arise once the prospective purchaser’s due diligence is underway then that could (a) extend deal timescales and / or (b) result in additional contractual warranties or obligations if the sale completes before the title has been updated.
By identifying and addressing these before marketing and ensuring a full title pack is available to the purchaser at the outset of the due diligence process, a clean and accurate title is available from day one – removing any uncertainty and preventing unnecessary delay.
What can sellers do now?
- Review the title early – ideally before preparing sales particulars;
- Address any matters early, and engage with the relevant land register early in the process;
- Collate all of the ancillary documentation, such as split offs or leases; and
- Build time for all of the above into pre-marketing timelines where needed.
Key takeaway
Identifying and correcting any issues with a registered title prior to marketing a property for sale can minimise delays, negotiation and costs. Early engagement means any updates could be completed by the time the due diligence pack is issued to the prospective purchaser.
