Property Hot Topic - Keeping Registers Up to Date
In this series of articles, VWV Property Litigator, Philip Sheppard, shares key property issues that often affect the healthcare sector including what to be aware of, the key warning signs and how to avoid problems.
In this issue, Philip discusses the need to keep Land Registry records up-to-date and what can happen if you don't.
When a partnership acquires property (be it freehold or leasehold), the partnership will often name 2 - 4 partners, who hold the legal title to the property on trust for all of the property-owning partners. These named partners are shown on the property's title register held at the Land Registry.
If one of the named partners leaves the partnership, then his or her name should be removed from the title. This is sometimes overlooked, and former partners remain named at the Land Registry. In extreme cases, some partnerships have only former partners named at the Land Registry.
This can cause real problems for current partners and former partners alike.
Former Partners
Former partners who hold the legal title of a property on trust for the other partners and who remain named at the Land Registry will remain bound by their responsibilities as legal owners and will still owe duties to the current partners. For example:-
- they may still be sued for breaches of covenant and / or lease obligations (e.g. non-payment of rent, prohibited use), even though they are not occupying or using the property;
- they may still be liable for failure to comply with obligations affecting the property (e.g. to keep in good repair or to undertake works under the Defective Premises Act 1972);
- they will not generally be allowed to profit from the property; and
- they may be sued for breach of trust or breach of fiduciary duty to the other Partners, if they act improperly or fail to act when required to do so.
Current Partners
Current partners will also have problems if former partners remain named at the Land Registry. This is because the named partners are often required to be involved in any dealings with the property. For example, if former partners remain named at the Land Registry:-
- the current partners will generally not be able to properly sell, assign, lease, surrender or mortgage the property, without the named partners' involvement;
- the current partners will not generally be able to serve or respond to notices without the named partners' involvement. This may, for example, make it difficult for a partnership to serve notice to end a lease which it no longer wants; and
- important correspondence and notices may be sent to or served upon the former partners. This can hinder the current partners' ability to react quickly (or at all) to important matters affecting the property.
It is therefore in the interest of both current and former partners to make sure that Land Registry records are kept up to date to reflect changes to the partnership. Whilst this administrative step is all too easy to miss, failing to do so promptly can make it much more difficult, time-consuming and costly to deal with your property in future.