Long before any of us had even heard of COVID-19, the Land Registry was operating at a significant delay. The ‘registration gap’ as it’s more commonly known is certainly not a new problem, however, the pandemic has certainly contributed to waiting times. Couple this with the recent Stamp Duty holiday and the resulting boom in the housing market, and pressure to process applications at the Land Registry is at an all-time high.
But how is it currently affecting property procurement? What is being done to rectify the problem? And are there any ways of navigating around the issue to ensure that sluggish property registrations don’t cause insurmountable setbacks for developers? Let’s discuss:
What are the main issues caused by Land Registry delays?
Under normal circumstances, minor delays are nothing to be overly concerned about. However, the widening gap is currently wreaking havoc for people across all areas of both the commercial and residential property market. What were previously just short delays, can now span many months can throwing many a business deal, project, or transaction into complete disarray.
During the ‘registration gap’ regardless as to whether a new owner has paid for or taken occupation of the property, they will only retain what is known as a “beneficial interest”. Legally, the property is only held on trust for the purchaser by the seller until such a point that they are registered as under the new proprietor’s name.
The most common issues that will arise from this situation are:
- Refinancing mortgages with borrowers can be disrupted, with financial penalties or heightened interest rates on overdue loans coming into play;
- Developers could find themselves unable to sell houses or new units;
- Landlords will not be able to grant leases or serve legal notices on tenants because their legal ownership of the property has not yet been registered.
- A potentially more catastrophic risk would be in instances where a chain dependent on registration and an application received by the Land Registry is faulty. This could ultimately stop a registration from being finalised by the Land Registry and if the issues cannot be resolved, a lender or buyer will not be able to complete a transaction.
What are the current timescales for Land Registry applications looking like?
The Land Registry recently advised that updating the register to add a mortgage or change ownership can take around 4 to 6 weeks, whilst creating a first registration, transfer of part, or a new lease is likely to take anywhere between 6 to 12 months.
In addition, other time frames to be expected include:
- requests to expedite – upto10 working days;
- Assent of registered land – around 7 weeks (this would usually be completed in 1-2 weeks);
- Upgrading a freehold title from possessory to absolute – circa 9 weeks (pre-Covid would have taken around a month);
- an e-application to either update the register of title or register a proprietor’s death will now take approximately 5 months when it would have previously been completed in a month.
The unique nature of the application itself will undoubtedly affect processing times, with often straightforward applications requesting register transfers taking just a number of weeks to go through, whereas more complex applications could take in excess of 9 months.
In some cases, buying a previously unregistered property could take between 6-12 months to be processed at Land Registry. This is often because an ordinance survey of the land is required for completion. Unfortunately, the ordinance survey service was temporarily suspended when the pandemic hit, resulting in a significant backlog for applications. It is now back up and running again though, so hopes are this will ease.
What can be done to speed up the Land Registration process?
The Land Registry’s launched its Digital Registration Service back in April 2021, in an attempt to reduce process times, but as yet, it has seemingly had little impact.
However, where it can be proven that application delays are causing financial difficulties, the Land Registry will accept requests for applications to be expedited, or fast-tracked. This is usually done by submitting a letter along with supporting evidence. This could be financial statements showing the default interest rate and penalty charges from lenders, for example. Or perhaps a property developer might choose to present marketing material that showcases how the delay is touching on sales.
Although you might anticipate that a Land Registry application will be processed quickly after expedition, this isn’t necessarily the case. If questions are remaining about the application and further requisitions need to be raised, then these matters will have to be dealt with first.
For example, should an application contain a discharge, notice must be served on the outgoing lender first.
If this is the case, it is advisable to speak directly with the outgoing lender in order to encourage a prompt response. The same goes for any solicitors dealing with the requisitions. In instances where all parties are able to work together, registration will be more quickly achieved.
If a request for expedition is accepted, the Land Registry will ensure an application is processed more swiftly, however it should be noted that processing time will still be dependent upon the complexity of the original application.
What if an expedition is not an option?
Registrations are a formality in most circumstances. But there is always a risk that the Land Registry could reject an application on the grounds that it is defective. For example, if the transfer deed or lease has not been signed or executed properly, or if there are wording errors in the documentation. Without registration, legal ownership will not be achieved, so it’s important to get things right the first time.
Where the need for special measures cannot be proven, requested for expedition will not be granted. This isn’t always a dealbreaker, however. There are steps that can and should be undertaken if the project allows.
For more straightforward refinancing or purchasing transactions, it’s possible that a buyer or lender might seek to proceed to completion with the registration still pending. But this should only be done if they have been able to secure evidence that the outstanding application is in good order, and always under the advisement of a legal expert. Pertinent actions could include;
- Cross-checking the certified copy transfer or lease;
- Closer examination of the existing title;
- Making sure that all plans attached to the transfer are correctly signed;
- Undertaking insolvency / bankruptcy checks;
- Checking that there the purchaser/borrower has consented to all restrictions on the existing title and any contained in the new title documentation;
- Ensuring, where applicable, that stamp duty has been paid;
- Checking if there are any outstanding loans to be discharged;
- Checking that the application has been submitted as a priority.
How can Signature Property Finance help?
There are two strands to the Land Registry delays; firstly, where someone has bought a property already and is awaiting the change in ownership to be updated before they can come to us for some funding. Secondly, where they come to us to fund the purchase, but depending on the circumstances, a land registry delay in registering our charge after completion may hinder them being able to exit the bridge within the initial agreed term.
Whilst we cannot provide definitive timescales for application approvals, what we can offer is experience and expertise in navigating the situation. Because we do all our legal work in-house and we understand how the Land Registry operate we can often pre-empt registration delays both before and after we have funded deals which is why we tell our brokers to speak to us as early as possible in a potential deal even if the borrower is intending to acquire an asset before they come to us for funding…
We will all watch and hope that the situation will ease in the coming year, but in the meanwhile, it’s best to prepare yourself for the long haul, and be realistic with timeframes to avoid disappointment.