Chancel Repair liability for home owners - conveyancing solicitors beware!

Author:

Most homebuyers will have heard of 'chancel repair liability', as the majority of conveyancing solicitors now commission either a search for possible liability, or they just automatically insure all their clients against liability.

The origins of this chancel repair obligation derive from medieval times, when every parish had its own priest or rector. The rectors (of around 5,200 churches) by the nature of their clerical status back then, had a number of rights, including the receipt of certain taxes (tithes) or income from the land of the parish (Glebe Land). The cost of repairs to the church was split between the rector (who had this income to use) and his parishioners, with the parishioners traditionally being responsible for the western end of a church (where they sat) and the rector being responsible for repairs to the chancel (the eastern end of a Church). Since these times, the land has been broken into many thousands of smaller parcels, yet this medieval repairing liability has continued to exist and as mentioned already, has been enforced or claimed by the Church.

Indeed, chancel land is reported as accounting for approximately 40% of all land in England and Wales. As a result conveyancers are quite naturally on guard to protect their clients.

The biggest problem is that a conclusive search for liability is very difficult, as a property need not have been adjacent to a church, and the liability may not have been recorded.

Still further, the Land Registration Act 1925 made liability for chancel repair binding on a purchaser, whether they have knowledge of the liability or not (which the law calls an 'overriding interest' (i.e. it overrides the content of a registered title deed).

In an attempt to reduce the unfairness (as opposed to an outright abolition), the law was changed on 13 October 2003 by the Land Registration Act 2002 (Transitional Provisions) (No 2) Order 2003 - following the Court of Appeal effectively abolishing chancel repair liability, the government then passing the Land Registration Act 2002 without continuing to state chancel repair liability as an overriding interest, only then for the House of Lords to effectively overrule the Court of Appeal and reinstate chancel repair as a continuing liability. The consequence ('the consequence') of the change in law by the 2003 Order being that the right to enforce a chancel repair liability will only be possible if by 12 October 2013 it is registered as a 'Notice' against the property's registered title at the Land Registry. Failure to register such a protective entry will mean that a buyer subsequently purchasing it after this date will take free of liability. This is because Section 29 of the Land Registration Act 2002 provides that "If a [transfer] of a registered estate is made for valuable consideration…registration [of it] has the effect of postponing …..any interest [i.e. the chancel repair liability]…..before the [transfer] whose priority is not protected [i.e. by the Notice - or as we shall see below in the case of unregistered land, a Caution against first registration] at the time of registration.

The same effect applies for unregistered land in that the relevant protective entry is a Caution against first registration, which will mean the Land Registry will notify the Church (or more accurately the Parochial Church Council ('PCC')) who can then lodge their Notice on the freshly registered title in priority to the subsequent purchaser taking ownership.

Many conveyancing solicitors and commentators consider 13 October will mean the end of chancel repair liability. Not true. That is a mis-conception. The right to enforce chancel repair liability does not cease after this date. It lasts indefinitely for registered titles where Notice has been entered by the Land Registry. It exists against property owners - even without registration - who remain the same before 13 October and after 13 October. Indeed, in that respect, the PCC has until a subsequent purchaser comes along to make their protective entry. This could be decades depending how long owners before 13 October 2013 hold on to their land after this date. For them uncertainty will persist.

However, rather than help the situation by simply abolishing chancel repair liability (in 1982, even the General Synod of the Church of England gave support to the phased abolition of the liability), the government have created a whole host of anomalies post-12 October 2013 - which will plague conveyancing solicitors for years to come, unless the law is changed again, and more conclusively this time:

1. There is also an argument that even after 12 October 2013, chancel repair liability may remain as a debt action against landowners who remained the same after 12 October and who have existing, but unregistered liability. In other words, enforceable against landowners even after they have sold the affected land. This may be a reason for all landowners to consider insuring against the risk of chancel repair liability, and to do so now, while premiums are low. Conveyancing solicitors can help.

2. After 12 October 2013, only purchasers for 'valuable consideration' (e.g. money) will take free of liability. This will not relieve those receiving the property by gift, insolvency, inheritance or on divorce. This is because of section 28 of the Land Registration Act 2002 makes any recipient of transferred land subject to whatever interests affect the property. Chancel Repair liability being seen by the Land Registry as an interest in land, and section 28 is subject to section 29 which as we saw above refers to the postponing of chancel repair liability only in favour of a transfer "made for valuable consideration". Consequently, landowners receiving land as opposed to purchasing it should again consider legal indignity insurance with the assistance of conveyancing solicitors.

3. The PCC are not compelled to register liability against all the properties in a particular parish which may be liable. If non-registration can defeat a claim of liability, registered liability affected property will have their liability increased to compensate. A form of 'joint and several liability' as confirmed by both Court of Appeal and the House of Lords.

4. The Law Society argue that the Land Registration Act does not make chancel repair liability unprotected by a Notice void. Rather, it loses "priority" over a transfer for valuable consideration (remember section 29 of the Land Registration Act 2002). The effect of this word is far from clear. The Law Society state that "In context, priority normally has one of two meanings: either the order in which transactions are to be implemented, or the order in which charges are to be satisfied. Neither of these seems to apply. When chancel repair liability actually results in a claim against the owner, there is no transaction to be registered, and there is no charge. It therefore seems likely – although, necessarily, there is no authority – that lack of protection on the register will have no effect on the enforcement of any claim."

However, some academics argue that even if this strict interpretation is correct, as a matter of public policy, such an argument would defeat the broader policy behind the change in law: to provide greater certainty to purchasers on whether they can take land free of chancel repair liability. However, with chancel repair liability having already been taken to the House of Lords, and tens of thousands of pounds at stake, further court litigation may well ensue.

5 . However, an extension of the Law Society's argument is the view that a Parochial Church Council's right to claim all or part of the cost of repairs to the chancel from a lay rector is not actually an interest in the lay rector's land, but a personal liability and no change has been made to the Chancel Repairs Act 1932 to give a lay rector a defence to a claim under the Act based on non-registration. Only interests in land require registration at the Land Registry and taking this one step further, are we correct to conclude that even though chancel repair liability had the luxury of being legislatively defined as an overriding interest in land, once it lost a classification as an overriding interest, it was not no longer defined as an interest in land, thus not registrable to be enforceable. Indeed, chancel repair liability is not a charge on land and so no owner has responsibility for his predecessors default and a PCC has no right of  recourse to the land of a lay rector who defaults. Arguably, it should not have been listed as an overriding interest in the Land Registration act 1925 s.70(1)(c).

Indeed, the 'consequence' as summarised in bold above seems to be the popular interpretation, but in fact, the technically correct one is that the Land Registration Act 2002 (Transitional Provisions) (No 2) Order 2003 (amending the Land Registration act 2002 which itself repealed the Land Registration Act 1925) provides that, for only a period of 10 years from the coming into force of the Land Registration Act  2002 on 13 October 2003, chancel repair liability  will remain an overriding interest that binds successive owners of land even though it is not protected by an entry in a register kept by the Land Registry.

What happens after that time? Has the wrong assumption been made? Even by very senior members of the legal profession? Is 13 October a red-herring and conveyancing solicitors are about to open themselves up to claims of negligence for no longer making chancel searches/taking out insurance for new buyers after 12 october 2013? After all, the test of negligence is what the reasonable man (or more accurately a reasonable conveyancer would do) - and we do not know what conveyancers will actually do after 13 October. Indeed, nothing - bar adverse publicity to the mission of the church - can stop PCC (who is a charity and who has trustee duties) making a claim for chancel repair liability from a successor purchaser after 13 October, and if they advance this point 6 argument with threats of legal bills, which conveyancer is going to test the defence of section 28 and section 29. Or will they just settle the claim?