No going back; expensive mistakes

Shabnam Ali-Khan, Partner in the Russell-Cooke Solicitors, property law and conveyancing team.
Shabnam Ali-Khan
2 min Read

Rees v 82 Portland Place Investments LLP and another [2020] EWHC 1177 (Ch)

In 2011 Ms Rees bought a flat at 82 Portland Place. The property formed part of two titles being the headlease and freehold. Ms Rees was entitled to a lease extension under the Leasehold Reform, Housing and Urban Development Act 1993 as the benefit of the right had been assigned to her by her predecessor. As is usual practice, Ms Rees registered unilateral notices (UN1) on both the freehold and headlease titles.

At the same time a collective enfranchisement claim was under way. This meant that Ms Rees' claim was suspended until the collective enfranchisement claim was completed under the s54 of the 1993 Act.

Unfortunately for Ms Rees, whilst the UN1 was registered under the headlease title, the UN1 on the freehold title was mistakenly rejected by the Land Registry. It believed that the collective enfranchisement process prevented the UN1 from being registered against the freehold title. As we will see below this turned out to be a very costly mistake for Ms Rees.

Once the collective enfranchisement process had concluded in 2017, the nominee purchaser became the competent freeholder and the headlease was merged and then closed. The Land Registry merged the unilateral notice which had been registered against the headlease and entered it directly against the freehold title. 

The freeholder granted an overriding lease over Ms Rees' flat to a new headlessor. Both the freeholder and headlessor agreed that they did not have to honour Ms Rees' claim based on s29 of the Land Registration 2002. A summary of this section states that a purchaser for valuable consideration takes a property subject to all interests on the register and all overriding interests but free of everything else. 

Ms Rees served a second notice on a "without prejudice basis" to the first one on both the freeholder and headlessor. The premium in the second notice was £1.8 million more than in her first notice. An order was also pursued to rectify the Land Registry's mistake to register her original unilateral notice.

The county court ruled against Ms Rees. It concluded that as the unilateral notice was not registered against the freehold title, Ms Rees' rights were not protected and the freeholder was able to acquire the freehold title free from her claim. The county court agreed that there had been a mistake by the Land Registry but the test for rectification against a registered proprietor in possession was not satisfied; it was not unjust not to alter the register (paragraph 3(2), Schedule 4, LRA 2002).

Ms Rees appealed which the High Court dismissed.

This case serves as a critical reminder that a notice of claim should be registered against all relevant titles. Should there be any doubt of the Land Registry's decision to register a notice it should be challenged.

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Briefings Property law and conveyancing enfranchisement law freehold headlease lease extension headlease title collective enfranchisement process