The importance of registering a lease

Section 4 of the Land Registration Act 2002 explains the requirements of registration. This states that a leasehold estate in land for a term which, at the time of the transfer, grant or creation, has more than 7 years to run, is subject to compulsory registration. Section 6 of the Act then deals with the duty to apply for registration of title.

When a lease of a premises is granted for a period of over 7 years, whether that be a shop, pub or warehouse, it is the tenant’s responsibility to register the lease at HM Land Registry, within two months following completion.

Most modern leases will contain a covenant in respect of registering the lease, stating the timescale that registration is to be submitted by. If the tenant is represented, their solicitor may deal with this for them, however quite often tenants taking a lease are unrepresented, and thus faced with dealing with the registration themselves.

Registrable dispositions only become legal rights once registered with HM Land Registry. This means that, if a tenant fails to register, the lease will operate in equity only. The importance of this for Landlords is that certain terms of the lease may become unenforceable, as the lease only forms a personal contract between landlord and tenant. For example, if a guarantor is party to the lease, the landlord may have difficulties in recovering any unpaid rent from them.

From the tenants perspective, they may be at risk of losing their rights to the property if somebody else was to make a claim over the land and secured this interest by way of registration at HM Land Registry.

Tenants may also face issues surrounding stamp duty land tax, as payment of stamp duty is triggered upon registration of a lease. Therefore, failure to register may result in missed payment penalties and interest on the amount payable, which is to be covered by the tenant.

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