Mind the gap: no registration, no costs

Elizabeth Dwomoh explains whether an equitable owner during a “registration gap” is considered a landlord for purposes of sections 79(6)(a) and 88 of the Commonhold and Leasehold Reform Act 2002. Key point During the registration gap, an equitable owner cannot be classified as the “landlord” for the purposes of sections 79(6)(a) and 88 of the Commonhold and Leasehold Reform Act 2002 as the legal interest in the property is still vested in vendor until registration is completed. The “registration gap” is the name colloquially given to the period between completion and the registration of the transfer of title. During this time the vendor holds the legal title in the property as a bare trustee for the purchaser, who is the equitable owner. Under section 79(6)(a) of the Commonhold and Leasehold Reform Act 2002, a right to manage company that seeks to acquire the right to manage its building must give a claim notice to each person who, at the date of the claim notice, is a landlord under a lease of the whole or any part of the premises. Further, under section 88(a), an RTM company is liable for the reasonable costs incurred by a person who is a landlord under a lease of the whole or any part of the premise in consequence of a claim notice being given by the RTM company. The issue that fell to be determined in 159-167 Prince of Wales RTM Co Ltd v Assethold Ltd [2024] EWCA Civ 1544; [2024] PLSCS 222 was whether, during the registration gap, an equitable freeholder was a landlord for the purposes of section 79(6)(a) and section 88 so as to entitle it to seek its costs of a withdrawn application to acquire the right to manage. How did the dispute arise? On 10 October 2019, Assethold Ltd purchased from Millcastle Properties Ltd and Millcastle (POFW) Ltd respectively the freehold and a 999-year lease of a property situated in North London. In June 2022, Assethold subsequently became the registered owner of the freehold interest in the property after an application made to HM Land Registry. The tenants of the property subsequently sought to acquire the right to manage the property. Through their RTM company, 159–167 Prince of Wales Road RTM Company Ltd (POW), a claim notice was given both to Assethold and MP Ltd in June 2021. Assethold served a counter-notice on POW disputing its right to acquire the right to manage on the basis that it had failed to meet the statutory requirements. POW applied to the First-tier Tribunal for a determination that it had in fact satisfied the same. On the eve of the hearing, POW withdrew its application. Assethold subsequently made an application for its costs under section 88. The FTT and UT decisions POW argued that Assethold was not a “landlord”, because at the material time it was given the claim notice under section 79(6) it had no legal interest in the property. Consequently, Assethold had no standing to serve a counter-notice or seek its costs under section 88. The FTT agreed. Additionally, the FTT determined that the mere fact that POW had served a claim notice on Assethold and made it a party to its application for a determination to the FTT did not give rise to an estoppel. Assethold appealed to the Upper Tribunal (Lands Chamber). The UT set aside the FTT’s determination. It found that an estoppel had been created either by representation or convention. In respect of detrimental reliance, the UT relied on as evidence of the same the fact that POW had named Assethold as the landlord in its application to the FTT and that Assethold had incurred costs as a consequence of engaging in the proceedings. POW appealed. Not a landlord On appeal, Assethold contended that it became the equitable owner of the freehold and headlease in 2019. As an equitable owner, during the “registration gap” it could therefore be deemed as the “landlord” for the purposes of section 79(6). Assethold relied on the decision of the Supreme Court in A1 Properties (Sunderland) Ltd v Tudor Studios RTM Co Ltd [2024] UKSC 27; [2024] EGLR 36 in arguing that during the registration gap a purchaser could exercise almost all the powers of the registered legal owner, including the powers of a landlord. The Court of Appeal disagreed. Looking at the natural meaning of the phrase “landlord under a lease” used in sections 79(6) and 88, the Court of Appeal determined it meant the landlord as a matter of law. Both the freehold and the headlease were exiting registered estate and, at the material time the claim notice was given, Assethold was not the registered legal owner of either interest. Under section 27(1) of the Land Registration Act 2002, the transfers did not operate at law until they were registered. Assethold was therefore not the landlord under any lease of the premises when the claim notice was given. No estoppel The Court of Appeal also found on the facts that an estoppel either by representation or convention did not arise. In particular, an estoppel by representation required a causal connection between the representation and the action that caused a detriment. It was Assethold that chose to incur legal costs in responding to the notice and proceeding, in circumstances where it knew it was not the registered legal owner of either the freehold or headlease. Elizabeth Dwomoh is a barrister at Lamb Chambers Photo by Newscast/Shutterstock