In the fifth of our series on the anniversary of the Land Registration Act 2002, a Land Registry lawyer looks at the recent history of leases
The basis of registered leasehold conveyancing was not, of itself, an issue which was one of the drivers of change to the system of registration that existed under the Land Registration Act 1925.
However, part of the fundamental objective of the draft Land Registration Bill included in the consultative document Land registration for the twenty-first century was that “the register should be a complete and accurate reflection of the state of the title at any given time…” (paragraph 1.5).
The fact that only leases with more than 21 years to run from the date of grant or date of assignment were the subject of compulsory registration (s.123(1), Land Registration Act 1925 (LRA 1925)) meant that a large proportion of very valuable property assets (including the majority of commercial leases) remained off the register, and took effect as overriding interests (s.70(1)(k), LRA 1925) in the conveyancing process.
The first main impact of the Land Registration Act 2002 (LRA 2002) on leasehold property was to substantially reduce the limit to the term of a registrable lease. So, the grant out of an unregistered estate of a lease for a term of more than seven years from the date of the grant, or the assignment or mortgage of leases with more than seven years left to run, generally became subject to the compulsory requirement for registration (s.4, LRA 2002). Leases with terms of more than seven years still to run could also be the subject of voluntary registration (s.3, LRA 2002).
Similarly, the grant out of a registered estate of a lease for a term of more than seven years from the date of the grant became a registrable disposition and so had to be completed by registration in order to take effect at law (s.27(1) and (2), LRA 2002). It also became possible to enter a unilateral or agreed notice in respect of leases granted for a term of more than three years from the date of the grant (s.33(b), LRA 2002).
There are special provisions for discontinuous (s.3(4) and s.27(2)(b)(iii), LRA 2002 and paragraph 3.9, Practice Guide 25 – Leases – when to register) and reversionary leases (s.4(1)(d) and 27(2)(b)(ii), LRA 2002 and paragraph 3.9 of Practice Guide 25), and specialised situations such as shared ownership leases, concurrent leases and leases and enfranchisement under the Leasehold Reform Housing and Urban Development Act 1993 (see Practice Guide 27 – The leasehold reform legislation).
In 2006 (Land Registration (Amendment) (No 2) Rules 2005), following consultation, Land Registry introduced prescribed clauses leases for most leases granted out of a registered estate on or after 19 June 2006, with most of the essential information required for entry in the register set out in panels on the front pages of the lease.
The exceptions to this provided by rule 58A(4)(c), Land Registration Rules 2003 (LRR 2003) are leases where a particular form is expressly required:
(a) by agreement entered into before 19 June 2006, or
(b) by an order of the court, or
(c) by another enactment, or
(d) by a necessary consent or licence for the grant of a lease given before 19 June 2006.
Another exception is a lease created by operation of law on a variation of a lease which is a deemed surrender and regrant: rule 58A(4)(d). This last exception is important, as can be seen below under Extension of leases by variation.
The new rule 58A means that conveyancers must ensure two things with respect to prescribed clauses leases.
The first is that the following matters are correctly specified or referred to in the correct panels.
- Alienation restrictions (LR8).
- Rights of acquisition such as renewal rights, options, obligation to surrender (LR9).
- Restrictive covenants by the landlord in respect of other land (LR10).
- Easements granted or reserved by the lease (LR11).
- Estate rentcharges (LR12).
- Applications for standard form restrictions (LR13). These must, in addition, set out the full wording of the restriction applied for (non-standard restrictions must be applied for on form RX1).
If not, Land Registry is not obliged to take any action with respect to these matters, unless an appropriate separate application is lodged, even if the matters are referred to elsewhere in the body of the lease (r.72A(3), LRR 2003).
Secondly, the title numbers of all the titles against which entries must be made in respect of LR9, LR10, LR11 or LR13 matters must be specified in panel LR2 or Land Registry again has no obligation to make entries against those titles (r.72A(4), LRR 2003 – in the case of non-prescribed clauses leases, the title numbers of the other affected land must be placed in panel 2 of form AP1, which must also specify the relevant clause containing the alienation clause, restriction or easement: paragraphs 4(b) and 5).
An application for first registration of a lease must be accompanied by sufficient details, by plan or otherwise, so that the land can be identified clearly on the Ordnance Survey map: r.24, LRR 2003.
In 2008 Land Registry introduced new triggers for compulsory first registration. These were effecting a partition of land which was subject to a trust of land and the appointment of new trustees. More leases therefore became subject to compulsory registration (Land Registration Act 2002 (Amendment) Order 2008).
The more problematic areas currently seem to be as follows.
- Easements. Where the lease itself is being registered, and (i) in a prescribed clauses lease the easements and affected titles are correctly identified in the correct panels, or (ii) in a lease which is not a prescribed clauses lease the affected titles are identified in panel 2 of an AP1, Land Registry will record the easement against both relevant titles. However, where there is a lease in which easements are granted and the lease is not being substantively registered, then if the servient land is registered the grant of the easements will need to be completed by registration in order for the easements to take effect at law, and this will require an application in form AP1. If the lease is also going to be noted, but not substantively registered, application for this will also be required in form DI. (See paragraph 5.2 of Practice Guide 62 – Easements and article 2 in this series on easements, Landnet 37.)
- Extension of leases by variation. Provided the deed of variation does not include an express surrender of the existing lease, or expressly demise a new lease, these do not have to be in prescribed form but take effect legally as surrender by operation of law. Therefore, the existing leasehold title will be closed, and a new title opened for the extended lease. It can be overlooked that a charge affecting the existing leasehold title will also come to an end, and that a deed of substituted security against the new, extended lease will also be required and must be submitted for registration. (See Practice Guide 28 – Extension of leases.)
- Determination of leases. It can be overlooked that inferior interests such as charges and underleases do not necessarily come to an end when a lease is determined on merger, surrender or disclaimer. The underlease is likely to take effect as a lease against the superior landlord’s title, and will be noted accordingly. Charges must be either discharged, withdrawn or cancelled, or they will prevent closure of the registered leasehold title (s.3.1.2, Practice Guide 26 – Leases – determination). In particular, Land Registry cannot close a leasehold title by disclaimer where there is a charge against that title because sections 178(4) and 315(3) Insolvency Act 1986 preserve the rights and liabilities in the property of any other person other than the bankrupt on disclaimer (see section 6.3.1, Practice Guide 35 – Corporate insolvency).
In March 2013, after consultation, Land Registry changed its practice in relation to the registration of a long lease under section 153, Law of Property Act 1925 because of lack of clarity of the effect of enlargement. Previously, on registration of enlargement, we would close the existing registered freehold title. Now we will keep that title open, and also grant a new freehold title to the applicant. So there may be two registered freehold estates in respect of the same land.
Otherwise, there has been little movement and there is no immediate intention to extend the requirement for first registration to shorter leases.