The Registration Gap
A purchaser will only acquire legal title to land once the Land Registry has completed the registration of the Transfer document and the new owner has been noted on the Register. The period of time between legal completion and the Land Registry registering the new owner on the Register is known as "the registration gap". During the registration gap, the new owner will only have a beneficial interest in the land, as opposed to legal ownership. Sometimes, the registration gap could be a number of months.
In the recent case of Baker v Craggs , the original owner ("the Seller") of two adjoining properties had agreed to sell one of the properties ("Property 1") to the purchaser (Purchaser 1) but omitted to reserve a right of way over Property 1 in favour of its retained land ("Property 2"). When the sale of Property 1 had completed, Purchaser 1 went into actual occupation of Property 1.
The Seller then sold Property 2 to another party ("Purchaser 2") and tried to grant a right of way over Property 1 for the benefit of Property 2 (without Purchaser 1's knowledge or consent).
The registration of Purchaser 1's title to Property 1 was cancelled because the plan attached to the transfer of Property 1 was incomplete and the Land Registry cancelled Purchaser 1's application to be registered as the owner of the Property 1 when the problem was not corrected within the required timeframe. Consequently, a new application had to be made to register Purchaser 1's ownership of Property 1.
When the application to register Purchaser 1 as the legal owner of Property 1 was completed by the Land Registry, Purchaser 1 found that, during the registration gap, a right of way across Property 1 in favour of Property 2 had been granted by the Seller and this had been recorded on the register of Property 1.
Despite the fact that at the time the right of way was granted, Purchaser 1 was (a) not aware of the grant and (b) in actual occupation of Property 1, the High Court initially ruled that the right of way was valid, causing considerable concern in relation to the position of a purchaser during a registration gap. The High Court ruled that because Purchaser 2 had paid the purchase price for Property 2 to two people, this trumped Purchaser 1's overriding interest and took priority over it (this is legally known as "overreaching").
However, on appeal, the Court of Appeal overturned this decision and held that the fact that Purchaser 2 paid the purchase price to two people could not trump Purchaser 1's right to be registered as the legal owner of Property 1, free from the easement. The Court of Appeal held that overreaching applies only to the sale and purchase of freehold and leasehold land and does not apply to the grant of an easement. Purchaser 1 was protected because it was in actual occupation of Property 1 at the time of the grant and the right of way granted during the "registration gap" was not binding.
This article is for general guidance only. It provides useful information in a concise form. Action should not be taken without obtaining specific legal advice.