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BUYING A NEW HOME - Guide to Chancel Repair Liability
There is a possibility that the property you are proposing to purchase may be affected by a potential "Chancel Repair" obligation to the local Parish Church. Such obligations stem from mediaeval times where land, previously owned by the Church to fund the local rector, had been sold and the new owner took on the repairing obligation attached to that land. Basically, any property located within the boundaries of a Parish where such a liability exists could be "caught". The penalty is financial in that it involves having to pay for the upkeep and repair of the chancel of the local mediaeval parish church. The liability runs with the land and does not have to have been registered against the title of a property in order to be enforceable by the Church of England. As mentioned above this liability is an “overriding interest” and will bind you even if not registered.
Legislation introduced on the 13 October 2003 changed the law in that that after 13 October 2013 the liability will no longer bind a buyer for value after this date will take free of the liability unless it is protected by a notice on the Register at the Land Registry.
This basically means that if your seller or a previous seller purchased the property for value after the 13th October 2013 or at the time your purchase completes (if it was subject to such a liability) no attempt to register the liability has been made then you will take the property free of any liability. An attempt may still be made to register the liability afterwards and the Land Registry may contact you regarding the same as they are not there to validate the interest but you may object/or apply for the entry to be removed.
However, whilst the chances are remote there is a risk that an attempt to register this liability could be made between exchange of contracts and completion. If this happens it is not currently clear whether or not the registration would proceed and then such liability be protected and you take the property subject to such liability and also subject to any costs in obtaining indemnity insurance on any subsequent resale by you or re-mortgage or entering into a Deed of Relinquishment ( a legal document where a person or organisation legally gives up their legal right to formally claim in the future).
We are aware that registrations have been made and are continuing to be made to try and protect the above interest and remain binding on future owners and retain their right to claim this liability from property/land owners.
Chancel Repair Liability will still affect properties that transact post the 12th October 2013. Approximately 5% of properties transact in the UK every year, this leaves 95% of properties still vulnerable after the first year. (Please note that this 5% is not all new properties, as many are re-transacted in following years). The liability only falls away at the point of first or next registration of a title after 12th October 2013. The liability is only removed after a property has transacted for valuable consideration (i.e. not for a nominal amount or by way of inheritance/gift etc.).
In the event that we become aware of any such registration or attempted registration prior to exchange we will of course contact you and discuss the matter further and seek your and any lenders further instructions.
The liability is still a clear and present danger to homeowners in England and Wales whose properties remain unsold and haven’t been purchased for value after the above date and we feel we must make you aware of this and provide you details of options available to you.
You cannot rely upon a possible misrepresentation claim in the sellers failing to notifying us or you prior to exchange as there are circumstances when the seller may not even be aware of such attempt to or actual registration e.g. where the sale is by mortgagees in possession, the seller does not live at the property and or has not received notice of the intention to register. This can also be difficult to establish and prove and is subject to other requirements/outcomes.
If contracts have been exchanged there is no general right to rescind a contract exists except where there is either a specific contractual right to rescind or the court exercises its equitable jurisdiction to set aside the contract on the grounds of mistake.
The sale contract will generally provide that the seller will sell the property free from incumbrances other than matters expressly specified to affect the property. The Standard Conditions of Sale provides that the buyer can claim damages where there is a material difference between the description or value of the property, or any of the contents included in the contract, as they are represented, and as they actually are. Again any claim for damages may not be your desired outcome and also incur considerable costs, stress and inconvenience to you.
The Standard Conditions also provides that the buyer can rescind the contract if either of the following applies:
The error or omission results from fraud or recklessness. The buyer would be obliged, to its prejudice, to accept property that is substantially different (in quantity, quality or tenure) from that which the buyer had been led to expect by the error or omission. Although not yet tested in the Courts we believe that it is unlikely that the entry of a chancel repair notice between exchange and completion would satisfy the criteria for rescission.
If you instruct us we can offer you the following options:
You may decide due to the risk being fairly low just proceed as normal and take a chance that no registration will be made or attempted registration will be made between exchange and completion. Any subsequent issue between exchange and completion would then be at your risk/cost.
You may instruct us to arrange an indemnity insurance (we can only arrange this when we are not aware of any express liability or registration or attempted registration so we would need to place this on risk prior to exchange of contracts and preferably as early as possible). This would cover you, your mortgagee and any future buyer or lender against any such demands being made. (If you or we are aware of any liability, or any liability has been registered or attempted registration made, or you instruct us to carry out a full chancel search which contains adverse results we will not be able to issue a policy and will need to obtain a specific quotation and any indemnity policy premium is likely to increase substantially. Please remember to let us know if you are aware of any such liability affecting the property.) If you instruct us on this basis we will confirm the cost of the policy to you and we will require immediate payment so we can place on risk immediately. If you subsequently do not proceed this sum will not be recoverable as the insurance would already have been taken out. The cost of the policy depends upon how much you are buying the property for but as an example a purchase at £250k would be in the region of £60.00.
You may instruct us to undertake a chancel check search if you wish. The ChancelCheck search provides an instant screening report that will confirm whether or not the subject property is within the boundary of an historical "risk" parish that could charge and/or register the subject property. This search is considerably less expensive than the full chancel check search and the result can arrive instantly. The downside with this search is that it does not show whether or not the property is located on land that has this responsibility but merely whether it falls within a Parish which does contain land which is subject to such a liability. If the property is identified as being located in a “at risk” parish you will be in the same position and likely still be necessary to obtain insurance to cover the risk and again the premium could be higher. You also have to pay for the search which is similar to the insurance premiums anyway so could just be duplicating cost. It may be a favourable option if you wouldn’t wish to proceed if there was any chance of the property being subject to such liability and not want to proceed. If the search states that the parish is which the property falls does not have any potential liability you can proceed with the relief that no registration should be made after exchange and before completion.
You may instruct us to obtain a full chancel search. This search will confirm whether there is any known liability. The downside to this search is that it is expensive, usually takes weeks to be completed and due to the records being incomplete is unlikely to give a definitive result.
- You instruct us to request the seller to agree a clause in the contract that in the event of such a registration between exchange and completion then you would have the option to rescind the contract but if you decided to proceed then the seller would be obliged to provide indemnity insurance on completion which obviously could be considerable. This is unlikely to be accepted where there is a chain as each transaction is reliant upon the other and because the outcome and potential cost of the indemnity insurance unknown.
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