Latest Land Registry guidance on restrictions and leasehold properties

Covenants on leasehold titles are in many instances not an issue, as most don’t require the consent of the landlord. When covenants do apply to a property, the landlord must enter them into the property register, to ensure the buyer is made aware. The landlord may then end the lease if there is a breach to what has been agreed — if such a clause allows.

Some covenants however have restrictions applied, whereby consent or a certificate is required from the landlord or management company. There is the possibility for many issues to arise with this process, and so the Land Registry have released guidance to help prevent problems occurring.

Landlords and management companies need to determine if the restriction is necessary, or if current legislation in force is sufficient, such as the Landlord and Tenant (Covenants) Act 1995. Where the restriction requires consent or a certificate, problems can occur when ownership is transferred. New landlords are unable to alter or acquire ownership of the restriction, but they can however apply for cancellation, claiming the party within the leasehold title is no longer of interest to the property.

Where a restriction is deemed necessary, a standard form PP restriction can be completed that will remove requirement for consent or a certificate. Alternative options can also be considered within this application, including:

 

  • Requirement of a certificate provided by a conveyancer.
  • O form restriction stating no certificate is required, only consent of a named party.
  • M form restriction stating name of the party who can provide a certificate.

Where a property is owned by a management company, and this changes to another company, any covenants set by or, on the rare occasion is in favour of the former company, will not transfer. The tenant can also apply to cancel any restrictions set by the previous company. If the restriction is in favour of a corporate landlord, an authorised managing agent can give consent or a certificate on behalf of the landlord, as set out in rule 91B of the Land Registration Rules 2003. These are known as “right to manage” companies, who may act on behalf of a landlord or management company.

Applications for a restriction on a leasehold property without a tenancy agreement, will be based on the terms of lease. In this instance, without attaining the tenants consent for the restriction, it can be applied if it is necessary in order to adhere to section 42(1)(a) of the Land Registration Act 2002. If the covenants are against assignment or underletting in the lease, the Land Registry will only accept restrictions requiring consent or a certificate from a conveyancer or the applicant of the restriction (or their conveyancer). If it was simply the landlord or managing agent that were to consent, this would allow them to have control over the regulations, more so than stated in general law.

Rather than naming the landlord or management company in a restriction, it may be titled with an alternative, to help minimise issues should the landlord or management company change. Titles that could be used include:

 

  • The proprietor for the time being of (landlord’s title number)
  • The proprietor for the time being of the registered estate comprising the reversion immediately expectant on the determination of the registered lease.

Any party may cancel a restriction using form RX3, including those who the registered legal estate has been transferred to but not yet registered. Reasons for the cancellation must be submitted, along with appropriate supporting evidence, and no charge will be incurred.

The party who is applying for a restriction can withdraw it using form RX4, with no fee applied. However restrictions cannot be cancelled where the person applying cannot be contacted or when consent or a certificate required is being unreasonably withheld. For these circumstances, parties can disapply a restriction under section 41(2) of the Land Registration Act 2002, by completing form RX2 and paying a fee. Reasons for disapplication must be identified and additional evidence may be requested if required.

Restrictions do set terms that need to be complied with in order for the application to be processed. When restrictions for covenants require consent or a certificate, there may be difficulty doing this. Alternative routes can be taken, such as:

 

  • When a landlord has changed, the new landlord or tenant may apply to cancel the restriction that relates to the specific covenants, under rule 97 of the Land Registration Rules 2003. This must be accompanied by a conveyancing certificate, or evidence the restriction is not for covenants in the lease, or is no longer required. The new landlord must produce a copy of the TR1 document as evidence of the property transfer.
  • When a corporate landlord company is dissolved, the tenant can apply for cancellation using form RX3, or disapplication of the restriction using form RX2. Supporting evidence, along with a conveyancing certificate will be needed.
  • Covenants within the lease that are by or in favour of a management company, will no longer apply when the company changes or is dissolved. If the new or titled management company dissolve, the tenant or landlord may cancel the restriction using a form RX3. This will need supporting evidence, along with a conveyancer’s certificate.

Please note this latest guidance from the Land Registry does not apply to restrictions on freehold titles.

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