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Effect of Para 2 of Schedule 3 of the Land Registration Act

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Effect of Para 2 of Schedule 3 of the Land Registration Act

Postby theycantdothat » Thu Sep 24, 2015 8:44 am

According to a post in another forum, a lessee entered into a deed of surrender and regrant and failed to register the lease. The freehold was sold and then some 5 years later the solicitors for the lessee tried to register the lease. The new freeholder objected but the Land Registry after calling for comments allowed the lease to be registered as the lessee was in occupation at the time of the transfer of the freehold and pursuant to Para 2 of Schedule 3 of the Land Registration Act 2002 their new lease overrides the transfer of the freehold.

What do we think of that?
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Re: Effect of Para 2 of Schedule 3 of the Land Registration

Postby atticus » Thu Sep 24, 2015 9:51 am

We think it's a fair result.
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Re: Effect of Para 2 of Schedule 3 of the Land Registration

Postby theycantdothat » Thu Sep 24, 2015 12:33 pm

atticus wrote:We think it's a fair result.


What if the registered proprietor had no notice of the unregistered lease?
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Re: Effect of Para 2 of Schedule 3 of the Land Registration

Postby shootist » Thu Sep 24, 2015 12:35 pm

atticus wrote:We think it's a fair result.


Is that the Royal We, the Papal We, or a little bit of wee coming out?
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Re: Effect of Para 2 of Schedule 3 of the Land Registration

Postby atticus » Thu Sep 24, 2015 2:22 pm

Shooter- read the question to understand the answer.
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Re: Effect of Para 2 of Schedule 3 of the Land Registration

Postby atticus » Thu Sep 24, 2015 2:23 pm

Tcdt: with lessee being in actual occupation?
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Re: Effect of Para 2 of Schedule 3 of the Land Registration

Postby theycantdothat » Thu Sep 24, 2015 6:18 pm

atticus wrote:Tcdt: with lessee being in actual occupation?


Yes.

Imagine you are a buyer. You look at the title of the freehold. It indicates there is a lease of Flat 27 expiring 2030. In fact a new lease was granted to the lessee expiring 2100, but the lessee's solicitor failed to register it. Some time later you get a letter from the Land Registry asking you to consent to the registration of the lease. You object on the grounds that there was nothing on the register to show an interest different from that which it actually showed. The LR come back and say that as the lessee was in occupation at the time you bought the lease overrrides the transfer to you.

Looking at para 2 it seems the LR are right. I have to say that if I were still doing conveyancing and buying property subject to tenancies it would not have occurred to me to enquire of the tenants if they had any interest beyond their current tenancies. It seems that that is needed - potentially horrendous if buying a block of a hundred flats or a shopping centre.

The following scenario is not inconceivable:

A owns a house and lets it on an AST to B. Later, A grants B an option to buy, the contract prepared by Messrs ABC & Co. The option is not protected by an entry on the register. A dies and the estate is dealt with by Messrs XYZ & Partners who are blissfully unaware of the option. The property is sold to C subject to B's tenancy. C's conveyancers carried out the usual procedures but did not make any enquiry of B. It seems that B's option is enforceable against C.
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Re: Effect of Para 2 of Schedule 3 of the Land Registration

Postby atticus » Fri Sep 25, 2015 2:18 pm

Para 2(b) of schedule 3 indicates that if you fail to enquire, you take the risk.
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Re: Effect of Para 2 of Schedule 3 of the Land Registration

Postby dls » Fri Sep 25, 2015 5:13 pm

The point being made, and with some justification, is that there are a whole range of real but very occasional risks which are run by any purchaser. Clearing them all makes the conveyancer look like a jobsworth, but the truth is that such an enquiry has to be undertaken.
That said, it would never have occurred to me.
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Re: Effect of Para 2 of Schedule 3 of the Land Registration

Postby theycantdothat » Fri Sep 25, 2015 11:30 pm

The practical problem is this:

·A tenant served a notice under section 42 of the Leasehold Reform, Housing and Urban Development Act 1993.

·The notice was not protected by the registration of a restiction or unilateral notice.

·The landlord sold the freehold.

·The new owner says he took free from the notice. He quotes as his authority "Hague" who or which says: "It [the section 42 Notice] is void against the purchaser of the freehold if it has not been registered by the time of such purchase."

Section 43(1) of the Leasehold Reform, Housing and Urban Development Act 1993 says:

Where a notice has been given under section 42 with respect to any flat, the rights and obligations of the landlord and the tenant arising from the notice shall enure for the benefit of and be enforceable against them, their personal representatives and assigns to the like extent (but no further) as rights and obligations arising under a contract for leasing freely entered into between the landlord and the tenant.

Section 56(1) of the Leasehold Reform, Housing and Urban Development Act 1993 says:

Where a qualifying tenant of a flat has under this Chapter a right to acquire a new lease of the flat and gives notice of his claim in accordance with section 42, then except as provided by this Chapter the landlord shall be bound to grant to the tenant, and the tenant shall be bound to accept—

(a) in substitution for the existing lease, and

(b) on payment of the premium payable under Schedule 13 in respect of the grant,

a new lease of the flat at a peppercorn rent for a term expiring 90 years after the term date of the existing lease.


Taking those two subsections together it is clear that the tenant has an interest in the property to which the section 42 notice related. Applying Para 2 of Schedule 3 of the Land Registration Act 2002 it seems to be the case that since the tenant is in occupation the right arising under the section 42 notice is an overriding interest and Hague is wrong.
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