For whom the bell tolls – the end of chancel repair liability?

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Overriding interests have been a hot topic recently, due to the fact that, as of midnight on 12 October 2013, their overriding status was lost. It is a common misconception though that as a result of this change of status we need no longer concern ourselves with such matters. Whilst it is true to say that in the absence of registration by the beneficiary such rights can be lost, this does not mean that we can allow overriding interests to become a distant memory as, in certain circumstances, such matters could still prove problematic. This article therefore examines the current position in relation to such matters.

Overriding interests and the position pre-October 2013

Overriding interests are a diverse class of third party interests, including such matters as rights to mines and minerals and chancel repair liability, which bind a purchaser of land even though they are not noted on the title entries of registered land or in the deeds of unregistered land. Such overriding interests bind the owner of the land even where their existence is unknown and they could be financially valuable to their beneficiary as they can grant the right to take minerals from the burdened land or permit the recovery of the costs of upkeep of a church.

One of the aims of the Land Registration Act 2003 (the Act) was to provide greater transparency for the purchasers (or mortgagees) of land and in order to achieve this aim it was decided that certain overriding interests would lose their overriding status following the coming into force of the Act on 13 October 2003. Due to the potential value of such rights, a ten-year transitional period was introduced by the Act to give the beneficiary of the rights time to protect them by registration. That transitional period came to an end on 12 October 2013. As a result of that deadline, the summer of 2013 saw a flurry of activity at the Land Registry with beneficiaries lodging applications to register protective notices in respect of their rights.

Chancel repair liability

Prior to the Act, very few people had even heard of chancel repair liability and less still considered it to be an issue when purchasing land. This ancient liability has origins that stem back to the dissolution of the monasteries during the rule of Henry VIII when the liability to pay for the repair of a church chancel passed to lay persons or organisations. Such people became ‘lay rectors’ and were entitled to the income from tithes and assumed responsibility for chancel repairs. The Ecclesiastical Dilapidations Measure 1923 relieved spiritual rectors from chancel repair liability but liability remained at common law for lay rectors. The Tithe Act 1936 abolished tithes but the liability to repair remained. As a result, land within a Church of England parish which has a vicar and a church dating from medieval times or earlier may still have a residual chancel repair liability.

The issue of chancel repair liability hit the headlines in 2003 when a Warwickshire couple, Mr & Mrs Wallbank, inherited a farm, one field of which was formerly rectorial land. The local Parochial Church Council (PCC) billed the couple for chancel repairs. The Wallbanks argued that the PCC was acting in a way that was incompatible with a convention right (the First Protocol to the European Convention of Human Rights, which protects quiet enjoyment of property) and so in breach of the Human Rights Act 1998. Although the Court of Appeal accepted this argument and ruled that liability was unenforceable, in 2003 the House of Lords overruled this decision and ruled that the liability was enforceable and the Wallbanks were bound to pay for the repairs.

Partially due to the increased publicity surrounding chancel repair liability as a result of this case, despite the lack of a central register for chancel repair liability, and somewhat patchy records, it has become standard practice to undertake a chancel repair liability search on the acquisition of an interest in land. A standard search does not categorically confirm whether a property is subject to a chancel repair liability but would confirm whether it is situated in an area that has the potential for such a liability. A positive result generally led to chancel repair indemnity insurance being put in place (with policies being widely available and relatively inexpensive). Despite the increased awareness of the risk associated with chancel repair liability the number of claims for contributions to the cost of chancel repair have remained relatively low and the flood of claims that some commentators believed would arise has never materialised.

The end of chancel repair liability?

It was assumed by some that the loss of overriding status would mark the death knell for chancel repair claims. Unfortunately though, this is not the case, and whilst further protection is required to preserve the liability, it has not disappeared altogether. The position is now as follows:

Registered land

  • The right to demand payment for chancel repairs can be protected by a notice on the register. Such notices can still be registered as of 13 October 2013 but at a cost and only if there has been no change in ownership of the land since 12 October 2013. The right will continue to bind the owner of land purchased or voluntarily registered before 13 October 2013 until that land is sold to a third party, even if the right has not been protected by a notice in the register. After a sale a purchaser for valuable consideration will take free of any liability that has not been protected by a notice.
  • Since a notice can still be entered at any time before a transfer is registered, the absence of a notice on the official copies of the register entries for a title should not be relied upon. A pre-completion priority search will protect a transfer prior to its registration and will therefore ‘block’ the registration of a notice following the date of a search.
  • At present, it would still be safest to undertake a chancel repair liability search as this will give some indication as to whether there is a risk that a notice could be entered onto the register before completion of an acquisition.

Unregistered land

  • The right to demand payment can be protected by a caution against first registration. As with notices in respect of registered land, a caution can still be lodged as of 13 October but at a cost and only if there has been no change in ownership of the land since 12 October 2013 and the land remains unregistered. The right will continue to bind the owner of unregistered land after 13 October 2013, until that land is conveyed to a third party or voluntarily registered. If a caution has been lodged, upon a sale and subsequent first registration the registrar will notify the cautioner, enabling them to protect their interest by entering a notice in the register. As from 13 October 2013 a purchaser will take free of any liability if it has not been protected by a notice in the register at the time of first registration.

It is worth noting that other previously overriding interests that lost their overriding status in October 2013, e.g. rights to mines and minerals, can also be protected in a similar way.

And what does this mean for the indemnity insurance market? It is likely for the time being that mortgage lenders will still require insurance to be put in place where a potential chancel repair liability has been discovered by a chancel repair search, particularly on any remortgage, as in these cases there will not have been a disposition for value to ‘wipe the slate clean’ in the absence of a registration. Insurance is also likely to be required (and advisable) where a purchaser is acquiring a property with a notice registered on the title, though at this stage the terms of a policy and the level of premium which it attracts have yet to be clarified.

What can be said with certainty though is that, despite the loss of overriding status, we’ve not yet heard the last of chancel repair liability.