Mind the registration gap when buying a property with a tenant

Coodes’ Partner and Commercial Property lawyer Kevin George explains why you need to be aware of the registration gap if you are buying a new property with a commercial or private tenant.

“A recent High Court case attracted my attention because it demonstrates why it is so important to get the right advice if you are buying a commercial or private property with a tenant. In this case, concerning an agricultural property, the High Court ruled that a notice to quit, served by the purchasing landlord to the long term tenant, was invalid because he was not yet the legal owner of the estate.

“The problem arose because of what is often referred to as the ‘registration gap’. This is the delay between a property being purchased and the transaction being recorded with the Land Registry. Most people are unaware that they do not become the legal owner of a property when the sale is completed but instead when the transaction is registered at the Land Registry. One of the important implications of the new landlord not yet being the legal owner is that he or she cannot serve notice to a tenant until the purchase has been registered.

“In recent months, we have seen reports that the registration gap is widening and can take several months. The sale of agricultural properties, like the one in the recent High Court case, can often be complex because land may be split and sold in parts, or in some cases there may not be a Land Registry record for agricultural land that has been in the same family for generations.

“I recently advised a client who was buying a new commercial property, which he wanted to use to run a business. We put a clause in the contract that stated that the existing owner should serve the current tenant notice. This prevented what could have been severe delays, with a serious impact on the client’s business and finances.

“So, if you are looking to buy a commercial, agricultural or private property with a tenant, ensure your lawyer is aware of the potential pitfalls of the registration gap.”

For more information on this issue, please contact Kevin George on 01579 347600 or kevin.george@coodes.co.uk.