Markitup editor issue

After upgrading to Perch 3, I'm getting a lot of issues. one of it is the editor. The space between paragraphs, headings (#, ##, ###, etc...) is being reformatted/removed. Which result to a page with proper spacing.

Example:

Heading three

Lorem Ipsum is simply dummy text of the printing and typesetting industry. Lorem Ipsum has been the industry's standard dummy text ever since the 1500s.

When an unknown printer took a galley of type and scrambled it to make a type specimen book. It has survived not only five centuries

After hitting save, the format becomes like the sample below.

Heading three <br /> here

Lorem Ipsum is simply dummy text of the printing and typesetting industry. Lorem Ipsum has been the industry's standard dummy text ever since the 1500s. <br /> here When an unknown printer took a galley of type and scrambled it to make a type specimen book. It has survived not only five centuries

Perch Runway: 3.0.1
Production mode: Production (100)
Installed apps: content (3.0.1), assets (3.0.1), categories (3.0.1), perch_blog (5.5.1), perch_events (1.9.5), perch_gallery (2.8.9), perch_members (1.6.1), perch_backup (1.2)
DB driver: PDO
DB tables: perch2_backup_plans (0), perch2_backup_resources (0), perch2_backup_runs (3), perch2_blog_authors (1), perch2_blog_comments (0), perch2_blog_index (1930), perch2_blog_posts (10), perch2_blog_posts_to_tags (2), perch2_blog_sections (2), perch2_blog_tags (3), perch2_blogs (7), perch2_categories (11), perch2_category_counts (3), perch2_category_sets (4), perch2_collection_index (0), perch2_collection_items (1), perch2_collection_revisions (1), perch2_collections (0), perch2_content_index (9061), perch2_content_items (1534), perch2_content_locks (0), perch2_content_regions (104), perch2_events (2), perch2_events_categories (1), perch2_events_to_categories (2), perch2_gallery_albums (1), perch2_gallery_image_versions (6), perch2_gallery_images (1), perch2_members (12), perch2_members_forms (1), perch2_members_member_tags (37), perch2_members_sessions (2), perch2_members_tags (13), perch2_menu_items (13), perch2_navigation (13), perch2_navigation_pages (34), perch2_page_routes (14), perch2_page_templates (68), perch2_pages (62), perch2_resource_log (4344), perch2_resource_tags (0), perch2_resources (914), perch2_resources_to_tags (0), perch2_scheduled_tasks (1), perch2_settings (38), perch2_user_passwords (3), perch2_user_privileges (43), perch2_user_role_privileges (55), perch2_user_roles (8), perch2_users (12)
Users: 12
App runtimes:
<?php $apps_list = array( 'perch_members', 'perch_blog', 'perch_gallery', 'perch_events', 'perch_backup', );
Scheduled tasks for perch_blog: delete_spam_comments (1440 mins)
Editor plug-ins:
H1: 1faf3becf821a0912d27b8ef2383fb36
L1: 335813541ff8d23b27a57482926c5895
F1: 0c66c2e1f82f9e0b7617b2cb8270f2c7
headerColour: #000000
content_singlePageEdit: 0
helpURL:
siteURL: /
hideBranding: 1
content_collapseList: 1
lang: en-gb
update_2.8.31: done
headerScheme: dark
update_runway_2.8.31: done
latest_version:
on_sale_version:
perch_members_update: 1.4
perch_members_login_page: /members/login.php?r={returnURL}
dashboard: 1
hide_pwd_reset: 0
content_hideNonEditableRegions: 1
content_frontend_edit: 0
perch_blog_update: 5.0.1
perch_blog_post_url: /news/{postSlug}
perch_blog_site_name:
perch_blog_slug_format: %Y-%m-%d-{postTitle}
perch_blog_akismet_key:
perch_blog_max_spam_days: 0
perch_blog_comment_notify: 0
update_runway_2.8.32: done
perch_gallery_update: 2.8.5
update_runway_2.8.34: done
perch_gallery_bucket_mode: single
perch_gallery_bucket: default
perch_gallery_basicUpload: 0
logoPath: /pwcms/resources/intranet-logo-1.png
perch_events_update: 1.8
update_runway_3.0: done
update_runway_3.0.1: done
perch_events_detail_url: /events/event.php?s={eventSlug}
perch_backup_mysqldump_path:
siteOffline: 0
PERCH_DEVELOPMENT: 10
PERCH_STAGING: 50
PERCH_PRODUCTION: 100
PERCH_SITEPATH: /var/www/vhosts/mysiteurl/httpdocs
PERCH_SCHEDULE_SECRET: WjrzUvLhTIZMWb3L
PERCH_DB_USERNAME: intranetbso
PERCH_DB_SERVER: localhost
PERCH_DB_DATABASE: intranetbso_
PERCH_DB_PREFIX: perch2_
PERCH_SSL: 1
PERCH_EMAIL_FROM: it@myemail.com
PERCH_EMAIL_FROM_NAME: Company name - Intranet
PERCH_LOGINPATH: /pwcms
PERCH_PATH: /var/www/vhosts/mysiteurl/httpdocs/pwcms
PERCH_CORE: /var/www/vhosts/mysiteurl/httpdocs/pwcms/core
PERCH_RESFILEPATH: /var/www/vhosts/mysiteurl/httpdocs/pwcms/resources
PERCH_RESPATH: /pwcms/resources
PERCH_HTML5: 1
PERCH_TZ: Europe/London
PERCH_MEMBERS_SESSION_TIME: 720 minutes
PERCH_PRODUCTION_MODE: 100
PERCH_FEATHERS: 1
PERCH_RUNWAY: 1
PERCH_ERROR_MODE: DIE
PERCH_DATE_LONG: %d %B %Y
PERCH_DATE_SHORT: %d %b %Y
PERCH_TIME_SHORT: %H:%M
PERCH_TIME_LONG: %H:%M:%S
PERCH_RUNWAY_ROUTED:
PERCH_STRONG_PASSWORDS:
PERCH_ASSET_VERSION: 7ca631ef9a54e99e413a
PERCH_DEBUG:
PERCH_PREVIEW_ARG: preview
PERCH_TEMPLATE_PATH: /var/www/vhosts/mysiteurl/httpdocs/pwcms/templates
PERCH_TEMPLATE_FILTERS:
PERCH_DEFAULT_DOC: index.php
PERCH_DEFAULT_EXT: .php
PERCH_XHTML_MARKUP:
PERCH_RWD: 1
PERCH_HTML_ENTITIES:
PERCH_STRIPSLASHES:
PERCH_PROGRESSIVE_FLUSH: 1
PERCH_PARANOID:
PERCH_FORCE_SECURE_COOKIES:
PERCH_DEFAULT_BUCKET: default
PERCH_TRANSLATION_ASSIST:
PERCH_PASSWORD_MIN_LENGTH: 6
PERCH_MAX_FAILED_LOGINS: 10
PERCH_AUTH_LOCKOUT_DURATION: 1 HOUR
PERCH_VERIFY_UPLOADS:
PERCH_PRIV_ASSIST:
PERCH_AUTH_PLUGIN:
PERCH_DB_CHARSET: utf8
PERCH_DB_PORT:
PERCH_DB_SOCKET:
PERCH_APPS_EDITOR_PLUGIN: markitup
PERCH_APPS_EDITOR_MARKUP_LANGUAGE: markdown
Hosting settings

PHP: 7.1.4
Zend: 3.1.0
OS: Linux
SAPI: cgi-fcgi
Safe mode: not detected
MySQL client: mysqlnd 5.0.12-dev - 20150407 - $Id: b396954eeb2d1d9ed7902b8bae237b287f21ad9e $
MySQL server: 5.5.52-MariaDB
Free disk space: 36.78 GB
Extensions: Core, date, libxml, openssl, pcre, zlib, bz2, calendar, ctype, hash, filter, ftp, gettext, gmp, SPL, iconv, pcntl, readline, Reflection, session, standard, SimpleXML, sockets, mbstring, tokenizer, xml, cgi-fcgi, mysqlnd, bcmath, curl, dba, dom, enchant, fileinfo, gd, imagick, imap, intl, json, ldap, exif, mcrypt, mysqli, odbc, PDO, pdo_mysql, PDO_ODBC, pdo_pgsql, pdo_sqlite, pgsql, Phar, posix, pspell, redis, soap, sqlite3, sysvmsg, sysvsem, sysvshm, tidy, xmlreader, xmlrpc, xmlwriter, xsl, zip, Zend OPcache
GD: Yes
ImageMagick: Yes
PHP max upload size: 128M
PHP max form post size: 8M
PHP memory limit: 128M
Total max uploadable file size: 8M
Resource folder writeable: Yes
Session timeout: 24 minutes
Native JSON: Yes
Filter functions: Yes
Transliteration functions: Yes
PATH: /usr/local/sbin:/usr/local/bin:/usr/sbin:/usr/bin
PP_CUSTOM_PHP_INI: /var/www/vhosts/system/mysiteurl/etc/php.ini
PP_CUSTOM_PHP_CGI_INDEX: plesk-php71-fastcgi
SCRIPT_NAME: /pwcms/core/settings/diagnostics/index.php
REQUEST_URI: /pwcms/core/settings/diagnostics/?extended
QUERY_STRING: extended
REQUEST_METHOD: GET
SERVER_PROTOCOL: HTTP/1.0
GATEWAY_INTERFACE: CGI/1.1
REMOTE_PORT: 34670
SCRIPT_FILENAME: /var/www/vhosts/mysiteurl/httpdocs/pwcms/core/settings/diagnostics/index.php
SERVER_ADMIN: it@myemail.com
CONTEXT_DOCUMENT_ROOT: /var/www/vhosts/mysiteurl/httpdocs
REQUEST_SCHEME: https
DOCUMENT_ROOT: /var/www/vhosts/mysiteurl/httpdocs
REMOTE_ADDR: 10.0.0.21
SERVER_PORT: 443
SERVER_ADDR: 10.0.0.120
SERVER_NAME: mysiteurl
SERVER_SOFTWARE: Apache
HTTP_COOKIE: PHPSESSID=0d47g6g9js0q0vn812s9dd7v2h; cmsa=1
HTTP_ACCEPT_LANGUAGE: en-US,en;q=0.8
HTTP_ACCEPT_ENCODING: gzip, deflate, sdch, br
HTTP_REFERER: https://mysiteurl/pwcms/core/settings/diagnostics/
HTTP_ACCEPT: text/html,application/xhtml+xml,application/xml;q=0.9,image/webp,*/*;q=0.8
HTTP_USER_AGENT: Mozilla/5.0 (Windows NT 6.3; Win64; x64) AppleWebKit/537.36 (KHTML, like Gecko) Chrome/57.0.2987.133 Safari/537.36
HTTP_UPGRADE_INSECURE_REQUESTS: 1
HTTP_CONNECTION: close
HTTP_X_ACCEL_INTERNAL: /internal-nginx-static-location
HTTP_X_REAL_IP: 10.0.0.21
HTTP_HOST: mysiteurl
HTTPS: on
SCRIPT_URI: https://mysiteurl/pwcms/core/settings/diagnostics/
SCRIPT_URL: /pwcms/core/settings/diagnostics/
UNIQUE_ID: WPd3EukLkmlKGRAetzThiAAAAM4
FCGI_ROLE: RESPONDER
PHP_SELF: /pwcms/core/settings/diagnostics/index.php
REQUEST_TIME_FLOAT: 1492612882.2397
REQUEST_TIME: 1492612882