Safeguarding your property against fraud

Property and land is often the most valuable asset people own.  It is therefore a target for fraudsters.  It is especially vulnerable where:

- it is empty or let

- the owner is abroad or absent

- the owner is infirm or has lost mental capacity.

Steps can be taken to protect property and land in these circumstances.

Where the property owner’s title is unregistered – and Land Registry statistics indicate that 30% of the titles to land in England and Wales remain unregistered, voluntary registration of the title should be considered.

The benefits are:

- it is more difficult for a squatter to obtain adverse possession against a registered title than a non-
  registered title;

- registration confers the benefit of a State-backed security of title – depending on the circumstances  
  of loss suffered as a result of fraud, it may be possible to receive compensation from the Land 
  Registry.  The availability of compensation is limited according to the circumstances of the fraud.  
  Compensation may be reduced where loss is suffered as a result of proper care by the owner;

- registration can simplify the conveyancing process, thereby reducing costs;

- some buyers are reassured by the title already having been registered;

- registering the title provides an up-to-date official record of who owns the registered title to land in 
  England and Wales.

Once registered steps should be taken to protect the registered owner’s interest by:

- notifying the Land Registry of any change of name;

- maintaining the correct address for the registered owner.  The Land Registry requires an 'address 
  for service.' This is an address to which the Registry will send letters and notices if they need to 
  contact the registered owner.  For example, where the Registry has received an application 
  concerning the property.  An incorrect name or address may mean that the owner does not receive 
  letters or notices from the Registry.

  Up to three addresses for service may be included on the register.  One of these must be a postal 
  address but does not have to be in the UK.  The other two addresses can include an e-mail 
  address;

- additional protection to the registered owner can be afforded by means of the registration of a 
  restriction.

  A restriction is an entry in the register that limits the ability of the registered owner of the land to 
  deal with or dispose of the land.  These limitations may be for an indefinite or specified period and   
  may be absolute or conditional on something happening (for example, the consent of a third party 
  being obtained).

Registering a 'restriction as to evidence of execution' may make fraud more difficult. Where this restriction has been registered, the Land Registry will not register for example a transfer of ownership or mortgage unless a solicitor or other professional conveyancer has certified that they have checked the identity of the person who has signed the transfer deed or mortgage deed.  This could help prevent a fraudster forging an owner’s signature on the transfer deed or mortgage deed.

There are numerous restrictions which can be registered.  Some are in standard form and others are drafted to suit the circumstance of the individual owners. 

Consideration should be given to the preparation of bespoke restrictions to protect the interests of vulnerable owners, for example where a sole registered owner has lost mental capacity or where the registered owner has died leaving the property empty.

Penningtons is able to advise as to how best to proceed to protect clients’ property and land where the title is both unregistered and registered and as to registration of appropriate protective restrictions.

To find out more, please contact Diana Forde

'Garden grabbing' - is it the end?

The Government recently announced changes to the planning system with the intention of reducing the infilling and development of existing back gardens, often referred to in the media as 'garden grabbing'.  Most media coverage of the point included the familiar term 'greedy developers', without any adverse reference to those homeowners who cash in on their land.

In response to a Department for Communities and Local Government investigation from January, the Government has recently revised PPS3, its national Planning Policy Statement regarding housing, to provide that gardens will no longer be considered as 'previously-developed land' or 'brownfield' land.  In addition, the Government has removed the national minimum density of 30 dwellings per hectare, giving local authorities more flexibility.

Comment on the changes has been predictable – residents' and environmental groups have welcomed the changes, the House Builders' Federation has called them unnecessary.  Furthermore, if developers are to be severely restricted in developing back garden-type sites, it will increase the pressure on existing greenfield locations and settlement boundaries.

While it is still early to see the full effect of these changes, anecdotal evidence suggests that various local planning authorities throughout the South-East have started to refuse any applications for such developments, purely on the grounds of the changes to PPS3. 

However, in the few cases so far where such refusals have been appealed, indications are that inspectors on appeal will look at each case on its merits – if the proposed development is in keeping with the locality and otherwise acceptable in planning terms, refusals are being overturned and permissions granted.

If that trend is confirmed, it appears that the changes to PPS3 will not actually have achieved anything - if a proposed development is acceptable in planning terms it will be approved, even if on appeal, as should always have been the case.

To find out more, please contact Graham Dixon

Re-gearing up

The re-gearing (or renegotiation) of the terms of an existing lease has become an increasingly popular option for both landlords and tenants in recent years as both parties seek to agree revised arrangements which satisfy their respective short term and long term needs.

An example of a simple lease re-gearing which benefits both the landlord and the tenant is as follows:

The tenant occupies an office building on a 20 year lease from 20 April 1997 with a term expiry on 19 April 2017.  In return for the tenant entering into a reversionary lease starting on the expiry of the current lease and expiring on 18 April 2022 (a term of five years), the landlord will grant the tenant a nine month rent free period to take effect from the completion of the legal documents.  In this example the landlord benefits by having the guarantee of a further five years worth of rent and the tenant benefits by receiving nine months rent free and certainty of its occupation for an additional five years.

If the terms of the lease are to be revised but with no extension to the lease term (eg the rent or rent review provisions are amended or a break clause is deleted), it will be sufficient for the parties to enter into a deed of variation.  However, if the parties also want to extend the lease term there are three options available to them:

1) Vary the terms of the current lease and grant a reversionary lease.

A deed of variation to alter the rent, remove a break clause and/or alter other terms of the existing lease as agreed can be entered into simultaneously with a reversionary lease for a term commencing on the expiry of the existing lease.  Generally the terms of the reversionary lease will be based on the terms of the existing lease.  It is important for the landlord to remember that as the tenant will have two separate leasehold interests in the property, both the current lease and the reversionary lease should be linked so that the tenant cannot assign one without the other and provisions need to be included so that if the landlord forfeits the existing lease the reversionary lease automatically determines as well.  Repairing obligations should also be rolled over into the reversionary lease.

The tenant will incur an SDLT liability calculated on the rent payable for the term of the reversionary lease.  This is payable on completion of the reversionary lease.

2) Surrender the existing lease and grant a new lease.

Upon the surrender of an existing lease both parties are usually released from all past, present and future obligations under the lease.  However, both parties must carefully consider the exact extent of the release where a new lease of the same premises is to be granted, if indeed any is to be given.  Specific consideration should be given to outstanding issues under the lease to be surrendered such as service charge reconciliations, dilapidations (which should be rolled over) and other unremedied breaches.

The new lease is usually completed simultaneously with the surrender.  With regards to the terms of the new lease the landlord and tenant could simply agree to base the new lease substantially on the existing lease (with the advantage that this should minimise the amount of negotiations between the parties).  The disadvantage of this is that if the lease is old there will be a significant amount of outdated drafting and the lease may in fact favour one party over the other.  Obviously if a new lease is negotiated it will normally take longer for the parties to agree its terms.

SDLT will be payable on the rent due under the new lease. It may be possible for the tenant to set off any SDLT paid on the surrendered lease against the SDLT paid on the new lease.

3) Using a deed of variation to extend the term of the lease.

As a matter of law, any variation extending a lease term will amount to a surrender of that lease and the re-grant of a new lease on identical terms.  This can have significant implications if the lease is excluded from the security of tenure provisions of the Landlord and Tenant Act 1954.  A landlord, by using a deed of variation in this way, may inadvertently grant a tenant security of tenure.  Generally the use of deeds of variation to extend a lease term is inadvisable.

It is important to remember that the re-gearing of a lease is best effected by landlord and tenant co-operating with each other in order to facilitate a mutually beneficial settlement.  Maintaining good landlord and tenant relationships can prove invaluable where one or both parties finds themselves in need of some flexibility.

The parties must always bear in mind the application of the Landlord and Tenant Act 1954 to the terms of any new or old lease and any surrender.  The validity of any notices which may need to be served under the 1954 Act is crucial so advice should always be sought from a solicitor.

To find out more, please contact James McNeilly