It
is not unusual in a dealing with leasehold transaction to be faced with
a restriction on the title in favor of a management company.
Many
leases for new developments in the 80s and 90’s imposed obligations on a
management company formed by the residents of to ensure that
responsibility for the upkeep and management of the block. More often
than not this resulted in a restriction on the leasehold titles along
the following lines:
“RESTRICTION: No disposition of the registered estate (other than a charge) by the proprietor of the registered estate is to be registered without a certificate signed on behalf of ABC Management
Company of [address] by a director, its secretary or its conveyancer
that the provisions of clause 5 of the Lease dated [ ] 1995 referred to
in the charges register have been complied with.”
Hundreds of thousands of titles (including freehold - where there is a management estate) have a similar restriction.
The
pressure to supply lenders with evidence of title registration as soon
as possible after drawdown of funds is increasing. I spoke with the
mortgage fraud team of a major lender recently and was surprised to be
advised that firms start going on their radar as a potential ‘problem
firms’ if the lender has not received the TID within 4 weeks of
completion. And yet most lawyers have to spend weeks chasing the
management company for the release of the restriction which prevents any
transfer by the proprietors of the registered leasehold titles in the
block, from being registered unless the appropriate certificate by the
management company is supplied. Evidence other than a certificate will
not be accepted as it places an unreasonable burden on the registrar to
decide if it complies with clause referred to in the restriction .
So
what do you do if you are simply banging your head against the
proverbial brick wall when it comes to obtaining a certificate from the
management company?
If,
despite your best efforts, the certificate is still not forthcoming,
either from the management company or its lawyers but you can show that
there is no reason why the transfer should not proceed, the registrar
may make an order disapplying the restriction to enable the transfer to
be registered. The transfer (and any new charge) can then be registered.
An
application to disapply a restriction must be made in form RX2.
Evidence of the efforts made to comply with the restriction must
accompany the application. If the registrar decides to make an order he
will also make an entry in the register noting the terms of the order
along the following lines: along the following lines:
“NOTE:- By an order dated [ ] made under section 41(2) of the Land Registration Act 2002 the restriction
set out above was disapplied in relation to any application to register
a Transfer of the registered estate to [ ] provided the application to
register the Transfer is made within three months of the date of the
order and that the application is in due course completed by
registration.”
Please
note that if you are applying to disapply and you
are also acting for a lender don't forget to keep the lender informed as
to what you are doing.
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