Buying land free from Chancel repair liability
When you buy property (whether residential or commercial property) one of the key tasks of your solicitor is to check for any potential hidden liabilities. Though the system of Land Registration is aimed at achieving transparency, there is still a little way to go and one such potential liability is chancel repair.
After 12th October 2013, this will begin to change.
What is Chancel repair liability?
Chancel repair liability (originally a tithe) is a perpetual liability to contribute towards the cost of repairs to the chancel of the parish church. The chancel is the eastern end of the church containing the sanctuary and the altar.
It affects land which used to belong to a monastery or abbey and which was sold by Henry VIII after the Dissolution of the Monasteries in the 16th century. Recovery of funds from owners of such land is governed by the Chancel Repairs Act 1932.
The liability goes with the property and can be significant. In the Wallbank case in 2001 the Parochial Church Council (PCC) claimed almost £100,000 for chancel repairs. The House of Lords found in the PCC’s favour leaving the Wallbanks with a £350,000 bill including legal costs.
Ascertaining whether or not the liability affects a particular property can be difficult. A Chancel search costs about £20 and will tell you if a property is in a liable parish and, if it is, insurance cover is often taken out against the costs of the repairs rather than incur extra cost pursuing more detailed enquiries.
Was Chancel repair liability abolished on 13 October 2013?
How then did Chancel repair liability change after 12 October 2013?
Churches risk losing the automatic ongoing protection of their right to claim chancel repair contributions from owners of affected property unless they act to protect the right.
They can protect their right if they register:-
- (in the case of registered land) a notice against the title; or
- (in the case of unregistered land) a caution against first registration so that the liability can be registered when the title is registered.
Once the liability has been registered it is an obligation that lasts in perpetuity.
When will the right to demand a contribution towards chancel repairs be lost after 12 October 2013?
When the affected property is sold for valuable consideration (i.e. for money or money’s worth) or unregistered property is registered and in either case, the liability has not been registered.
Until either of those events occur Churches will still be able to register their interest in perpetuity after 12 October 2013.
It is important to note that in those events the right will only be lost as against a future buyer and therefore it seems likely that Churches will still have a right to demand a contribution from any person who owned the property prior to the point at which the right is lost against a future buyer.
What happens if the right has not been registered and the property is transferred after 12 October 2013 without valuable consideration?
The right is not lost against the buyer if title to the property is transferred after 12 October 2013 by way of a gift, at an undervalue, by inheritance or on divorce as this is not for valuable consideration.
How is the Church responding to this?
The Church has been advising its Parochial Church Councils (PCCs) to register all liable properties by 12 October 2013 which would guarantee the protection of their right. As indicated above they can still do so after 12 October 2013 in certain circumstances.
A majority of the Dioceses in England and Wales are known to be investigating which properties are liable and actively registering.
Whilst protecting the right is a prudent step it does not necessarily follow that it will eventually be exercised.
Is it necessary to search or insure for Chancel Repair liability after 12 October 2013?
A Chancel Repair search should still be made to determine potential liability. Obtaining insurance if there is a potential risk should be considered and may be a cost-effective way of ensuring that a property transaction goes ahead.
If a notice has been registered against the property title this may mean that insurance is not available or only at a much higher cost and the owner may have to seek a release of the liability from the PCC.
Could this jeopardise a property transaction?
Yes, and sellers should ask their solicitor to check the position before they market the property.
Furthermore, a Church could register a notice only a short time before completion when the buyer’s solicitor is about to make the usual pre-completion search. If this happens it may well jeopardise completion of the transaction and result in irrecoverable legal and other costs for the buyer and the seller.
In conclusion, whilst in the long term this should lead to transparency and reduce the amount spent unnecessarily on insurance, in the short term it will give rise to a few more issues to resolve on property transactions than is the case at present.
rhw Solicitors LLP, specialists in commercial property law
call: rhw Guildford solicitors on 01483 302000