Land Registry guidance on lease cancellation

Land Registry have recently summarised their practice on lease cancellation.

As circumstances surrounding leaseholds are often complicated, cancelling an entry or closing a title requires a high level of care. As Tim Smithers described in a recent update from Land Registry, applications which are not quite complete or incorrect can cause problems and delay further down the line. It is, therefore, essential that all parties have a clear understanding of the technical details involved, reducing the number or requisitions and speeding up the process for clients and legal professionals.

In the register, a lease may be protected by a notice on the reversionary title as well as by substantive registration. Within the article, Tim looks at various scenarios where leases may be determined, going over the minimum evidence required by the Registry in order for a leasehold closure application to be considered.

The statutory framework for cancellation of closure of this kind can be found in the Land Registration Rules 2003; specifically, rule 79. It states: “an application to record in the register the determination of a registered estate must be accompanied by evidence to satisfy the registrar that the estate has determined”.

It goes on to state that the registered title “must” be closed if the registrar is so satisfied, and cancel any notice in any other register title which relates to that estate. When a registered leasehold title is closed, any notice of the lease in any other registered title will automatically be cancelled.

The article then goes on to detail the various reasons as to why a lease would be brought to a close.

Expiry:

Where the lease is granted for a fixed period, it will automatically expire when this period ends. It may be extended through legislation. Whilst the Landlord and Tenant Act 1984 applies to the majority of business leases, the Local Government Housing Act 1989 applies to most residential tenancies. If the lease was not determined in accordance with this legislation, the application must confirm that the legislation does not affect it. Where the tenant has an option to renew, there must be evidence to demonstrate that this option had not already been, and cannot be exercised.

Notice:

Enabling either the tenant or landlord to serve notice to terminate, a break clause may be within the lease’s terms. This might include pre-conditions which require compliance in order for the notice to take effect. A statutory declaration or statement of truth may also be needed; these act as evidence and should be attached to the copy of the notice served, describing the date of service and method. Any relevant statutory tenure protection for tenants will also need to be addressed within the application.

Forfeiture:

Also commonly included within a lease, is a provision which enables the landlord to initiate forfeiture. In order to be triggered, this kind of provision will require a specific event to have occurred, often including non-payment of rent, breach of a tenant covenant or insolvency. Common law principles in this area are overlaid by statutory protection for tenants.

Forfeiture can be initiated by taking court proceedings or through re-entry in a peaceful way.

Where possession proceedings are initiated, it is the claim form which affects the forfeiture. Until the possession order is granted, the status of the lease is suspended with the forfeiture being backdated to the service of proceedings.

Where a Land Registry application is based on a court order, it must include:

• The form stating the forfeiture event
• A certified copy of the court order, either directing forfeiture or ordering possession
• The sheriff’s return or a statutory declaration or statement of truth which illustrates the facts stated amount to re-entry on a stated date.

Tim then goes on to explain what should be included in an application based on peaceable re-entry, highlighting the elements required for the accompanying statutory declaration or statement of truth:

• “Prove the facts which are stated to amount to re-entry on a stated date, including details of how re-entry was effected and by whom.
• If the forfeiture is for non-payment of rent, establish:
  • the nature of the sums unpaid, and explain how they are ‘rent’
  • whether a formal demand was required and if so, demonstrate that demand was made
  • the amount and period of rent arrears, and confirmation that this was sufficient to trigger the proviso for re-entry.
• If the forfeiture is for breach of covenant other than non-payment of rent, establish:
  • that the landlord served the requisite notice under section 146(1) of the Law of Property Act 1925 on the tenant on a stated date (if the lease is not registered, evidence must be lodged to show that the person served was the tenant)
  • if the breach is of a repairing covenant:
    • that the section 146 notice meets the service requirements of section 18(2) of the Landlord and Tenant Act 1927, and that reasonably sufficient time has elapsed to enable the repairs to be executed
    • in the case of a lease with three or more years unexpired at the date of the section 146 notice, that the section 146 notice contained the required statement (under section 1 of the Leasehold Property (Repairs) Act 1938) that the tenant was entitled to serve a counter-notice claiming the benefit of the Leasehold Property (Repairs) Act 1938, and the tenant did not do so
    • that the tenant failed to comply with the section 146 notice.”

He then goes on the list the required elements where the peaceable entry is in relation to residential premises:

“Establish that the following statutory provisions either do not apply or have been complied with (please refer to the legislation for the complete requirements).

• Section 2 of the Protection from Eviction Act 1977

If the premises are let as a dwelling, establish either that no one was residing in the premises, or if someone was, that they were not lawfully residing there.

• Section 81 of the Housing Act 1996, as amended by the Commonhold and Leasehold Reform Act 2002

If there are disputed arrears of service charges, forfeiture may not be initiated until the service charges have been determined by the appropriate tribunal or a court, and any right to appeal has lapsed or been abandoned.

• The following provisions of the Commonhold and Leasehold Reform Act 2002which relate to a long lease of a dwelling (as defined).
  • Section 166: a tenant is not liable to pay rent unless the landlord has given the tenant a notice specifying the amount of and date for payment.
  • Section 167: a landlord may not forfeit the lease for failure by the tenant to pay rent, service charge or administration charges, unless the amount exceeds a prescribed sum (currently £350), or has been unpaid for a period in excess of a prescribed period (currently three years).
  • Section 168: a landlord may not serve a section 146 notice for breach of a tenant’s covenant unless the tenant has admitted the breach, or 14 days has elapsed after the appropriate tribunal or a court has determined that the breach has occurred.”