Article - Property Law & Practice

Land Registration Act 2002 - Effects

The Land Registration Act 2002 came in to force on October 13th 2003 .  Its main objective is to provide a complete and accurate reflection of the ownership of land.  It has also been suggested that it should be possible to investigate this ownership online, keeping enquiries and inspections to a minimum.  The Law Commission acknowledge that ‘absolute’ registration is unrealistic, but the new legislation will have a considerable impact on the commercial property market.

Effects of the legislation

Increased cost of taking a lease of more than seven years

Under the legislation it will be compulsory to register any lease which is granted for a term of more than seven years.  Thereafter, the assignment of any registered lease must be registered as must an assignment of an existing lease with more than seven years left to run.  This will result in increased legal costs due to the expense of the registration process.

Increased burdens on landlords

Landlords will be faced with more problems in the future if the tenant is not legally represented, as is often the case.  If a tenant takes a lease requiring registration but fails to do this it will cause problems in the future.  In this case, it is recommended not granting a lease of more than seven years.

Need for cancellation from the register

There is also the problem that when leases that have been registered expire they must be cancelled from the register.  This creates the likely scenario that many unrepresented people will simply not bother to cancel the lease from the register defeating the purpose of the system.

A way to avoid the need for cancellation from the register is to grant a lease of less than seven years, with an option on the lease to grant for a further term.  This means that the tenant can simply extend their term on the lease thus saving the need to register a new lease and cancel the old one.

Increased scope to find comparables for rent reviews and new leases

The Land Registration Rules 2003 make it possible for the public to make an application for official copies of documents referred to in the register of title and other documents kept by the registrar.

This is a great advantage for landlords and tenants wishing to establish the true state of the market rates.  However, the down side to this is that a situation could arise where tenants of a multi-let property in a shopping centre or industrial estate would be able to look at the rent and any specific provisions relating to rent review or alienation of their neighbouring tenants.  This could potentially reducing the bargaining power of landlords and restrict the rent that they are able to command on their premises.

The scope for searching for comparables for rent review will, therefore, increase by being able to search the register for leases of 7 years or more that may be comparable to your premises and type of business.

Obviously the potential to have any lease of seven years or greater on the public register will be a matter of concern for many landlords.  They will be in a weaker bargaining position given that tenants will effectively be aware as to what each of them is paying.  The argument of having the information excluded from the register on grounds of sensitive commercial information is also unlikely to be accepted by the Land Registry.

Article First Published: 31 October 2003


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