Real Estate monthly digest - February 2018

Government issues response to Land Registry consultation on digital conveyancing

The original consultation and the Government response paves the way for fully digital conveyancing documents with electronic signatures.

The Government has responded to the Land Registry consultation issued in February 2017 to amend the Land Registration Rules 2003 in order to facilitate digital conveyancing. The Government plans to go ahead with the proposals contained in the consultation and notes its ambition "for HMLR to become the world’s leading land registry for speed, simplicity and an open approach to data".

The consultation included a proposal to "allow (but not require) all dispositions that must be registered to be carried out using digital documents with digital signatures, after the registrar has issued a notice that the service is available". Some points of note in the Government’s response include:

• Addressing concerns raised in relation to fraud by stating that “we cannot go into detail about our counter-fraud measures, but we believe the proposed amendments will enable digital services that are no less secure than paper transactions”. The response notes that the GOV.UK Verify service which the Government proposes to use for individuals is supplemental to the existing conveyancer ID checks.

• In relation to identity assurance for corporate bodies, stating that ”HMRC is continuing the development of a new Government Gateway service (GG3), which will provide service credential management for businesses and organisations wishing to use Government digital services”.

• In relation to e-signatures, stating that “HMLR will be operating as a trust service provider using advanced electronic signatures. We will be subject to EU Regulation 910/2014. This means the e-signatures will not be denied legal effect and admissibility as evidence in legal proceedings”. The Land Registry noted in the consultation document itself that this form of e-signature did not need to be witnessed. The Government’s response also notes that the Land Registry will be taking on some additional risk in being a trust service provider and that this liability is set out in the EU regulations dealing with electronic transactions. More generally, the response states that “HMLR will continue to look at and monitor other e-signature solutions that exist or emerge in the market, but we are currently satisfied that our own will be appropriate for the rigours of the land registration system”.

• That the changes proposed in the consultation will allow a framework to be built which will allow for digital conveyancing for “any disposition that must be registered”. The main change is that “the parties will use a different kind of signature, and to complete the document the conveyancer will press a button on their computer requesting HMLR’s system to apply the date to the e-document, instead of using a pen to write the date on it”. The response also states that the law behind the transactions will fundamentally be the same and the new procedures will not be compulsory.

• Plans to revoke or update certain outdated orders and rules and to provide new services (such as easier access to historic copies of the register) will also go ahead. Changes will be made to clarify business days and working days to allow the Land Registry to be open for longer but so as not to prejudice deadlines for responding to notices.

The changes to the rules proposed in the consultation will come into force on 6 April 2018 and will allow the Land Registry to introduce digital conveyancing.

The service of break notices during the "registration gap" - Sackville UK Property Select II (GP) No.1 Ltd and another v Robertson Taylor Insurance Brokers Ltd and another [2018] EWHC 122 (Ch)

The High Court recently held that a break notice served by an assignee of a lease, prior to registration of its interest at the Land Registry, was invalid and the break was ineffective.

A landlord granted a ten year lease to a tenant (T) in 2013. The lease was registered at the Land Registry and contained a break clause allowing the tenant to terminate the lease on 14 March 2018 on not less than 9 months’ written notice subject to compliance with specified pre-conditions.

T’s business was acquired by another related company (A) and the lease was subsequently assigned in March 2017 to A pursuant to a licence to assign. Notice of assignment was given to the landlord in April 2017 attaching a copy of the deed of assignment, but A failed to register the assignment until July 2017.

On 02 May 2017, before A became registered at the Land Registry and therefore in the "registration gap", A’s solicitors sent a break notice to the landlord to exercise the break right in the lease. The notice stated that it was served on behalf of A as "tenant under the lease". The landlord’s solicitors contested the validity of the break notice on the basis that:

• A was not the legal tenant under the lease at the time the notice was served, T was and it was T who should have served the notice, and
• there was no intention that the solicitors should serve notice on behalf of T and any reasonable person receiving the break notice would not conclude that it had been served on behalf of T.

The High Court ruled that the "Tenant" for the purposes of the break notice was T, and not A. When a registrable lease is transferred, the transfer must be registered in order to vest the legal estate in the assignee. This was not done, and therefore T remained the "legal" tenant under the terms of the lease and any notice should have been served by or on behalf of T.

To try and save the notice, it was argued that it had in fact been served on behalf of T. The Court determined that on the facts, whilst it was clear that A intended for a break notice to be served, it was not clear that the intention was for the notice to be served on behalf of T. Further, the notice clearly stated that the solicitors acted on behalf of A and reasonable person in the landlord’s position would not have assumed that, despite the reference to A in the notice, A’s solicitors actually meant to refer to T.

For further detail please click here.

Brownfield land registers come into effect but councils miss deadline

In April 2017 the Town and Country Planning (Brownfield Land Register) Regulations 2017 came into force which required local authorities to publish brownfield land registers by 31 December 2017. The purpose of these registers is to compile details of previously developed land in relation to which an application for Permission in Principle may be made. The land may also be included in part 2 of the register which would mean that it is granted Permission in Principle without the need for an application.

The Campaign to Protect Rural England found that 70 out of 337 local authorities had failed to publish brownfield land registers by 3 January this year, however the Ministry of Housing, Communities and Local Government said that if publications after the deadline are taken into account, the figure is more like 27. The land which has been included on registers identified by CPRE would be able to provide a minimum of 977,000 new homes.

Planning Resource noted in January this year that very few of the local authorities who have published registers have produced part 2 of their register in relation to which sites would benefit from Permission in Principle.
The introduction of brownfield land registers and Permission in Principle was anticipated to provide a real boost for housing led development by streamlining the consenting process and to incentivise prioritising the use of brownfield land over greenfield land. However where local authorities are already open to the principle of housing led development on brownfield land but they want to retain greater control over the quality of design, provision of affordable housing and other similar issues they are disincentivised from including land in part 2 of the registers that would otherwise grant Permission in Principle.

Time will tell if the maturing of this new consenting process pays dividends in terms of housing provision at a time when the UK Government has published consultation papers such as “Planning for the right homes in the right places: consultation proposals” (September 2017) off the back of the Housing White Paper “Fixing our broken housing market” (February 2017). However the failure of many local authorities to meet the publication deadline and choosing not to include land on part 2 of registers presents a barrier to such progress in the short term.

VAT and supplies of timeshare accommodation

The Upper Tribunal has held that the grant of timeshares for annual short term stays in a property were not excluded from the VAT exemption for supplies of land as the provision of accommodation in a hotel "or similar establishment": Fortyseven Park Street Ltd v HMRC [2018] UKUT 41. The Upper Tribunal considered that the overall nature of the supply of the interest to buyers under a Membership Agreement and the accompanying rights and obligations under that agreement was sufficient to distinguish the situation from that of a supply of standard rated hotel accommodation.

For further details please click here.

Breakfast Briefing: GDPR - what real estate professionals need to know

GDPR comes into effect on 25 May 2018 and will fully replace the Data Protection Act 1998. In this session partners Ali Crosthwaite and Lawrence Brown provide an overview of the new GDPR regime and look at what’s changing. The session highlights the key points that those involved in real estate should be aware of and considers the GDPR in the context of a data journey for a purpose built student accommodation tenancy schedule.

To view the session and materials please click here.