We have added reviewed this practice note and rewritten some parts of it. We have also deleted the section of the note that incorporated published Ask questions and, where relevant, incorporated information from the answers into the main body of the note.
Leases: Registration clauses
This practice note explains when and why a lease should contain covenants requiring the tenant to:
- Register the lease.
- Register dealings.
- Notify the landlord of dealings.
- Close the registered title.
The following abbreviated terms are used in this note:
HA 1985: Housing Act 1985.
LPA 1925: Law of Property Act 1925.
LRA 2002: Land Registration Act 2002.
LRR 2003: Land Registration Rules 2003 (SI 2003/1417).
LTA 1954: Landlord and Tenant Act 1954.
Registration: grant of the lease
What does a "registration of this lease" clause do?
Where a lease is substantively registrable (see When is a lease substantively registrable?), it will typically include a tenant's covenant to register the lease at the Land Registry, within a stated time. This covenant may be backed up with obligations on the tenant to:
Deal with any requisitions raised by the Land Registry.
Provide the landlord with official copies of the tenant's title, once registered.
Why is a "registration of this lease" clause needed?
The clause aims to:
Minimise the registration gap, to ensure that the tenant to whom the lease has been granted is the legal tenant (see Practice note, The registration gap and the case of Brown and Root ( www.practicallaw.com/4-107-4012) ). The registration gap issue is particularly important on any subsequent dealing by the tenant (see Why is a "registration of dealings" clause needed?).
Ensure that the requirement to register the lease is not overlooked.
Give the landlord a right in damages against the tenant, if it suffers loss as a result of the tenant's failure to register.
Can the covenant be deleted?
This covenant is unnecessary and can be deleted if the lease is not substantively registrable (see When is a lease substantively registrable?). The landlord may then consider including a clause prohibiting the noting of the lease (see Standard clause, Prohibition against noting of lease at HM Land Registry ( www.practicallaw.com/0-201-8135) ).
If the lease is substantively registrable, the tenant might argue that the clause is unnecessary, given registration is in the tenant's interest. However, the landlord's concerns about the possible registration gap will outweigh this. The vast majority of commercial leases contain a tenant's registration covenant.
In most cases, modern commercial leases will contain a clause requiring a tenant to comply with all relevant laws (see Practice note, Leases: compliance with laws clauses ( www.practicallaw.com/7-422-4050) and it might be possible to argue that this covenant also covers the need to register the lease on grant. Unless the wording of the covenant very clearly covers registration obligations, it would be unwise for a landlord to rely on this to make sure that the lease is registered. A compliance with laws clause may be limited to matters that relate to the occupation and use of the demised premises, rather than the lease itself.
Time limit for application
The landlord will want the time limit for making the application to be as short as possible. However, the tenant (and its lawyers) need sufficient time to deal with post-completion matters and make the application for registration.
A period of three or four weeks is typically allowed, bearing in mind:
the tenant must calculate and pay any SDLT due, and for notifiable transactions, submit a Land Transaction Return to HMRC within 30 days of the effective date ( www.practicallaw.com/3-107-6200) , which is usually the date of completion of the lease (see Practice note, SDLT and the grant of a lease ( www.practicallaw.com/8-107-4821) ). The tenant may prefer to delay payment towards the end of this 30 day period;
where granted out of unregistered land, the tenant must apply to the Land Registry for first registration (using Form FR1 - First Registration application ( www.practicallaw.com/8-106-6958) ) within two months from the date of completion of the lease;
where granted out of registered land, the tenant must apply to the Land Registry for registration (using Form FR1 - First Registration application ( www.practicallaw.com/8-106-6958) ) within two months from the date of completion of the lease, but will usually want to apply within the priority period afforded by a priority search made before completion. For more information on the priority period, see Practice note, The day list, priority searches and outline applications: Priority search certificate ( www.practicallaw.com/6-107-3912) .
The tenant may want to delete this obligation, if it views the obligation to deal with the Land Registry's requisitions as too extensive. The landlord will want to make sure that the registration concludes and so will want a covenant that obliges the tenant to respond to the Land Registry's queries. A mere application for registration does not guarantee that the registration will conclude.
Provision of official copies
The tenant may want to amend this obligation so that it is only obliged to forward a copy of the completion of registration documentation. In the overall course of the creation of a new lease, however, the small additional expense of providing official copies of the new leasehold title is possibly not worth an argument.
A substantively registrable lease will be open to public inspection unless and to the extent that it is given exempt information document (EID) status (section 66, LRA 2002 and rule 136, LRR 2003, as amended).
For further information, see Practice note, Exempt information documents ( www.practicallaw.com/6-107-4898) and LR Practice Guide 57 - Exempting documents from the general right to inspect and copy ( www.practicallaw.com/9-106-6750) .
Additional confidentiality covenants
If the landlord has confidentiality concerns, it should consider:
Entering into a confidentiality agreement (see Practice note, Confidentiality agreements in property transactions ( www.practicallaw.com/1-107-4155) ).
Amending (if the lease is substantively registrable) the "registration of this lease" clause (see Registration: grant of the lease), to place the tenant under a contractual obligation to submit the landlord's EID application together with the tenant's application for substantive registration.
Including (if the lease is being granted for a term of seven years or less) further tenant’s obligations to deal with the situations where the lease might still be sent to and retained by the Land Registry (see Practice note, Exempt information documents: Drafting implications for landlords ( www.practicallaw.com/6-107-4898) ).
For example, the landlord could include a provision prohibiting the tenant from registering an agreed notice in respect of the lease (or any easements granted in the lease) on the landlord's title. However, there are enforceability and other major concerns to consider before imposing such a covenant, see Standard clause, Prohibition against noting of lease at HM Land Registry ( www.practicallaw.com/0-201-8135) .
Including the following additional confidentiality covenants in the lease, which will be available for a successor in title of the landlord and will bind successors in title of the tenant:
[- .1] The Tenant shall not make any application to HM Land Registry to designate this lease as an exempt information document [without the consent of the Landlord].
Why? The landlord needs to control what the tenant sends to the Land Registry.
Even if the tenant makes a successful EID application, only the form EX1A and the edited-out parts of the lease will be exempt from public inspection. The tenant's application (form EX1 and any accompanying correspondence) would be publicly available.
If the landlord wants to make its own EID application, it needs to ensure that the tenant's application does not conflict with or prejudice the information that the landlord wishes to keep confidential.
If the square bracket wording is used, the landlord will be able to approve the extent and form of the tenant's EID application. However, the landlord should resist a tenant's amendment that "such consent is not to be unreasonably withheld", as the concept of reasonableness here is uncertain.
[- .2] The Tenant shall not make any objection to an application by the Landlord to HM Land Registry to designate this lease as an exempt information document.
Why? For clarity. However, it would be difficult for a tenant to object, as the Land Registry is bound to grant the landlord's EID application unless it appears to be groundless (rule 136, LRR 2003) and is not required to notify the tenant of the landlord's application. It would also be difficult for a tenant who has entered into a confidentiality agreement to show that the landlord's application was groundless.
[- .3] The Tenant shall not make any application for an official copy of any exempt information document version of this lease.
Why? Such an application could trigger removal of EID status (rule 137, LRR 2003).
Including provisions to require:
any assignee or undertenant to enter into a confidentiality agreement (see Practice note, Leases: Assignments: Other conditions or circumstances ( www.practicallaw.com/8-422-1211) ); and
an EID application to be made following any assignment or underletting (see Assignment of a lease: checklist ( www.practicallaw.com/9-201-3416) ).
There cannot be absolute confidentiality (at least where the landlord's title is registered):
due to the requirements relating to the noting of (legal) easements in leases on a landlord's registered title; and
because information in a lease cannot be made exempt information (and therefore kept off the register) if to do so would prejudice the keeping of the register.
The Code for Leasing Business Premises in England and Wales 2007 (unlike its 2002 predecessor, the Code of Practice for Commercial Leases in England and Wales) does not make any specific recommendations regarding confidentiality (see Practice note, Code for Leasing Business Premises in England and Wales 2007 ( www.practicallaw.com/1-219-3968) ).
When is a lease substantively registrable?
For a summary of how a lease might be dealt with at the Land Registry, see box, When is the grant of a lease registrable? A "registration of this lease" clause is appropriate for new leases that either "must be registered" or "may be registered".
For more information, see:
What does a "registration of dealings" clause do?
A commercial lease will usually contain a separate clause requiring the tenant to ensure that any subsequent dealings with the lease, that are registrable at the Land Registry, are in fact registered there. This covenant may be backed up with obligations on the tenant to:
Deal with any requisitions raised by the Land Registry.
Provide the landlord with official copies of the tenant's updated title (and, where applicable, the undertenant's title), once registered.
This clause principally covers assignments (of leases with more than seven years left to run) and underlettings (where the underlease term is for more than seven years). See box, When do dealings have to be registered?
Why is a "registration of dealings" clause needed?
The rationale for this clause is the same as for the covenant to register the grant of the lease (see Why is a "registration of this lease" clause needed?).
If a registered lease is assigned, but the assignment is not registered, only the equitable interest passes to the assignee. The legal title to the lease would remain with the assignor.
Even where the assignment is registered, there can be problems with the gap between the assignment taking place and the change in ownership being registered at the Land Registry. If the assignee fails to register, the landlord will have to enforce the tenant covenants and serve any notices (that have to be served on the legal owner) against both the former tenant and the assignee. For more information, see Practice note, The registration gap and the case of Brown and Root: The consequences: legal ( www.practicallaw.com/4-107-4012) .
The negotiation points mirror those for the covenant to register the grant of the lease (see Negotiation points), although a covenant to register dealings is likely to be a greater concern for the landlord as it will want to be certain of who is "legally" the tenant.
What does a "notification of dealings" clause do?
A commercial lease will typically require the tenant to notify the landlord of all dealings. This obligation usually falls on the tenant from time to time, although each clause must be considered in its own right. Normally the assignee of a lease will give notice of the assignment to its landlord.
For some time, leases have included an obligation on the tenant to pay the landlord's solicitor's fee for registering dealings with the lease. Sometimes, this is expressed in general terms, such as to pay the landlord's reasonable professional costs, but some leases will specify a particular fixed registration sum. The latter sort of provision can cause problems where the lease specifies a sum that does not reflect the time taken to deal with registration, usually because the lease is relatively old and the specified fee has not kept pace with inflation. If a lease provides that the tenant must pay £10 plus VAT to register an assignment of the lease, then the landlord has no contractual right to charge anything more, in the absence of any other provisions of the lease that might require additional payments. For example, a clause that imposes an obligation on the tenant to pay all of the landlord's reasonable legal fees in connection with the assignment might allow for a claim in respect of the actual work done in registering the assignment.
The lease may also contain a tenant's covenant to supply the landlord with details of the property's occupiers, promptly on request.
The "notification of dealings" clause goes further than the obligations on a tenant to respond to a landlord's request for information under section 40 of the LTA 1954 (as revised by the RRO 2003), which only applies within the last two years of the lease term (or within two years of the date on which the lease could be brought to an end by the landlord) (see Practice note, Business tenancies - section 40 information requests ( www.practicallaw.com/1-107-4971) ).
Why is a "notification of dealings" clause needed?
The clause aims to ensure that the landlord's tenancy details are up-to-date. There is no general obligation on a tenant to notify its landlord when the lease is assigned, so most modern leases include a specific requirement for the tenant to give notice of assignment.
The obligation to provide details of occupiers aims to enable the landlord to check that no unauthorised dealings have taken place.
The tenant may argue that:
The registration fee is unnecessary. The landlord may be happy to recover its costs under the provision in the costs clause, assuming this is sufficiently widely drawn, or through an obligation in the licence authorising the dealing (where applicable).
The landlord should only be allowed to request occupiers' details, for example, once in any 12 month period.
What does a "closure of the registered title" clause do?
If a lease contains a tenant's covenant to register the lease, it will usually also contain a separate tenant's obligation to close the registered leasehold title at the end of the term.
The interpretation clause will normally state that reference to "the end of the term" is to the end of the term however it ends. The tenant's covenant to close its title will therefore apply however the lease is determined.
If the lease is not substantively registerable, this clause could be adapted to require the tenant to apply to the Land Registry for:
Any notice of the lease to be cancelled.
The registration of any easements or rights granted by or over, or reserved out of, the lease to be cancelled.
There will be cases where such tenant's covenants are simply not enforceable (for example, where the tenant has vacated the property without trace). In such cases, the landlord will have to deal with removal of the entry against the landlord's title itself. Provided the landlord can supply satisfactory evidence that the lease has determined, the Land Registry will remove the entry upon the landlord's application.
The general indemnity clause in the lease usually provides for the tenant to indemnify the landlord against all costs arising out of any breach of the tenant's covenants, so (in theory) the landlord's costs incurred in making the application resulting from the tenant's failure to do so should be recoverable.
Why is a "closure of the registered title" clause needed?
When the lease ends and the landlord wants to re-let or sell, the landlord will want the tenant's leasehold title to be closed and the notice of the lease on the landlord's title to be removed (see LR Practice Guide 26 - Leases - determination, para 3.1.1 ( www.practicallaw.com/9-106-6731) ).
The landlord will prefer to have a contractual obligation on the tenant to close its title and to ensure that the landlord's title can be cleared.
The tenant should not have a problem with the inclusion of this clause, which is standard.
The tenant may want to delete the additional obligations to:
Deal promptly and properly with requisitions: it is belt and braces.
Keep the landlord informed of its progress, on the basis this is unnecessary.
When is the grant of a lease registrable?
Must be registered
May be registered
May be noted
Cannot be registered or noted
All new leases granted for a term of more than seven years.
New leases :
(Section 37, LRA 2002.)
New leases for a term of three years or less and which are not otherwise required to be registered.
(Section 33(b), LRA 2002.)
Reversionary leases, for a term commencing more than three months after the date of grant.
Reversionary leases, for a term commencing more than 21 years after the date of grant.
(Section 149(3), LPA 1925.)
Discontinuous leases for a term of more than three but not exceeding seven years, out of unregistered land.
Discontinuous leases for a term of three years or less.
(Section 33(b), LRA 2002.)
Leases with no certain start date.
Right to Buy leases (Part V, HA 1985), for any term.
Landlord and tenant are the same person or company.
Preserved Right to Buy leases (section 171A, HA 1985), for any term.
Public-private partnership leases.
(Section 90, LRA 2002.)
When do dealings have to be registered?
The following dealings must be registered: