The registration gap is a risk of buying a property.

The gap between settlement and registration of the new owner’s interest poses a potential risk to buyers. Here’s how it might affect your property transaction.

After settlement, Landgate must modify the Title to register the new owner’s interest in the property.

Because settlement documents must be checked by Landgate before the Title is altered, this process can take some time – a period that is referred to as ‘the registration gap’. The duration of this gap differs depending on the complexity of the deal, but we often advise clients that it may take four to six weeks.

The danger of the registration gap: If another party registers an interest in the Title before the buyer’s interest is registered, registration of the buyer’s interest may be stalled. Without their name on the Title, the buyer would be restricted from selling the property, or otherwise transacting on the Title.

A recent settlement case illustrates how issues can arise during the registration gap. In this case, the buyer’s bank lodged the Transfer of Land for registration after settlement. About a week after the Transfer of Land was lodged, a legal firm lodged a caveat on the property on behalf of a third party.

Landgate dealt with the Transfer of Land and the lodgement of the caveat at the same time. Since these two documents were conflicting (the caveat referred to the seller as owner of the property), Landgate moved the documents to Complex Dealings and then to Stopped Documents.

In other words, the Title was not transferred the buyer’s name.

In this case, all that Landgate requires to go through with the transfer is a letter from the party that had lodged the Transfer of Land for registration, asking Landgate to proceed with the transfer.

However, issues with the registration gap can be much worse. For example, had the caveat been lodged before the Transfer of Land, or had there been a defect in the Transfer and the caveat was registered first, the buyer’s interest could not be registered until the caveat was removed – a potentially time-consuming and costly process.

Unfortunately, the registration gap is a risk inherent in the current system of property transactions. While buyers can take out Title Insurance, there is little that real estate agents can do to prevent issues during the registration gap. That said, it is useful to know that even after settlement, it may be four to six weeks before the buyer is officially registered as proprietor of the Title.

Image by Upupa4me via Flickr.