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Effect of registering a notice at the Land Registry to protect an agreement for lease 21 July 2015

What is the effect of registering a notice at the Land Registry to protect an agreement for lease?  That was the question answered as a preliminary issue in A2 Dominion Homes Ltd v Prince Evans, decided on 15 July 2015 and so far reported only in summary on Lawtel (subscription needed).

The facts were simple, although the surrounding circumstances are more complicated.  A landowner (L) entered into an agreement for lease with a housing association (H) for the grant of 33 long leases of flats in a block of flats.  The price exceeded £3m and there was a deposit of £1.25m.  H’s solicitors registered a unilateral notice to protect the agreement for lease, as one would expect.

But here is the twist.  Before the leases were granted, L charged the property to a bank (B).  It was agreed that B’s consent was needed to the grant of a lease.  But was B’s consent necessary to the grant of the 33 leases that L had already agreed to grant to H?

No, said Robert Englehart QC, acting as a judge in the Chancery Division.  Curiously, there appears to be no authority one way or the other, but the reason for registering a notice is to confer priority for the purpose of section 29 Land Registration Act 2002. If B’s consent were needed to the grant of the lease, that would mean that the arrangement between L and B would have priority over the earlier, and protected, arrangement between L and H – which is exactly the opposite of what section 29 provides, once a notice has been registered.  So B’s consent was not needed.  H’s notice protected not just the agreement for lease, but also the lease that is to be granted at completion pursuant to the agreement.

This has to be the correct answer, from the point of view of land registration law.  And – happily – it’s the fair answer as well.  According to the Lawtel summary, the judge was also heartened to see that the view was supported by comments in Megarry & Wade “The Law of Real Property” (paras 17-057 and 17-058, since you ask, although I haven’t looked at them yet) – which may not be surprising, given that one of the editors of that work is Charles Harpum, who (as law commissioner at the time) played a significant role in devising the system of priorities in the Land Registration Act 2002.

Click here for the Lawtel summary (subscription required)

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