Overriding interests

Brecher managing partner Nicky Richmond tries to separate the church from the chancel ahead of some key changes that are due to come in next October

13 October 2013. A significant date and not only because it’s my birthday. It’s the date on which certain overriding interests will lose their overriding status at the stroke of midnight. Broadly, this means that they have to be registered to be enforceable although, as ever, it isn’t quite as simple as that.

And please don’t switch off now because whether or not you are a property lawyer if you’re a property owner this might affect you. And it’s starting to gain traction in the press. It was even on the Today programme a couple of weeks ago. Chancel repairs on the national news. Who’d have thought it?

So what is an overriding interest? It’s an unregistered interest (ie not registered at the Land Registry), which will overrideiesurvive, first registration of property and any subsequent sales, purchases or other dispositions and binds the owner or purchaser of land.

There are a number of rather esoteric overriding interests, all of which will lose their ‘protected’ status in 2013. I’m only dealing here with the right to claim for the repair of a church chancel as, in practice, that is the most likely of those interests to come back to bite you.

So what is it? Broadly, it is the liability of an owner of land to pay for the repair of the chancel of a parish church. A chancel. Not the whole church, as many lawyers assume.

According to the Chancel Repairs Act 1932, a chancel is “the chancel of any church of or belonging to a benefice”. So far so unhelpful.

According to Wikipedia, it is “the space around the altar in the sanctuary at the liturgical east end of a traditional Christian church building”. So that’s clear then.

As a property lawyer, I find myself trying to explain to clients the quite bizarre possibility that the local PCC might be able to claim against them for church repairs, whether or not their house is near to a church. Most people (and especially non-Christians) find this arbitrary, not to say archaic, if not actually offensive. I am one of those people. Ironically, I live in a house called Old Vicarage Cottage. In case I forget to think about it.

The position in relation to chancel repairs is not uncontroversial. The 2001 Law Commission Report into Land Registration for the 21st-Century quoted the Court of Appeal in the case of Wallbankwho held that chancel repair liability “.They recommended scrapping it, describing it as archaic and capricious and a relic of the past; no longer acceptable.

Wallbank. The case that is used to strike fear into the hearts of conveyancers and which has led to the bulk and fairly automatic purchase of insurance policies to cover the risk. Apparently this is a £20m-a-year industry. I’d be surprised if it’s not more than that.

Why do we get insurance policies and what do they cover?

We get insurance policies because it’s so difficult to ascertain with any certainty whether or not a property has the liability. This is because the system is incredibly archaic. There is an excellent guide to the whole process published by The National Archives.

Once you have read this and, assuming that you have not lost the will to live, you will realise why property lawyers simply do the online search and then, if the search shows that there is a risk, get an insurance policy.

And the policy? I suspect that eight out of 10 property lawyers, if asked, would say that the insurance policy should simply cover the risk of the client having to pay out, should the client receive a valid claim for payment towards chancel repairs.

But does it? Well, yes and no. Not every policy gives the same cover. I looked at two leading providers. One of them covered :

  • the cost of defending or prosecuting proceedings;

  • damages awarded by a court;

  • all sums which the insured is liable to pay with the written agreement of the underwriters or as required by a court;

  • any residual reduction in market value as a direct result of a claim and payment having been made under the above clause; and

  • any other costs incurred again with the written agreement of the underwriters.

So in a situation where a PCC issues a valid claim, the underwriter has to give itswritten agreement. What if they don’t? What are the circumstances where that agreement can be withheld? The policy doesn’t tell you. This seems rather odd.

The other policy that I looked at was slightly different. It covers:

  • any payment demanded in relation to Chancel Repair Liability;

  • the difference in market value on any subsequent sale where there has been a loss claimed under the policy;

  • all other costs and expenses incurred with their prior written consent;and

  • costs and expenses incurred by the insured with their prior written consentin taking any action to defend any claim.

Again, the small print of these policies needs examining, because while on the face of it this looks more promising, the requirement to obtain the underwriter’s consent for other costs and expenses might be problematic.

Also, there is an exclusion in one in relation to any contribution towards the cost of repair to an area of church other than the chancel.Given that the definition of ‘chancel’ does not appear to be entirely clear, this could lead to argument.

If chancel repair liability could only cover what would appear to be a relatively small area, it would tend to suggest that the potential liability should be quite limited but the initial claim in Wallbank was for circa £95,000 and after the litigation costs, the bill was nearer to £350,000, which no one would regard as minor.

I can’t find anything more recent on chancel repairs than the Wallbank case. I’m not sure if there is a central record of successful claims. Could this be a £20m+ industry based on a single 2003 case?

And with the pending change, how worried should we be? Are PCC’s going to be scrabbling around in the records looking to establish liability? I’m sure somebody somewhere is thinking about how to help PCC’s find out whether they should be serving notices. There’s always a bottom-feeder.

I imagine your local PCC is not going to be shouting from the rooftops about its intention to protect its right to claim from its unwitting parishioners – that’s not particularly touchy-feely is it?

Arbitrary and capricious. Not good words for the PCC to have in mind when considering their position, but in these cash-strapped times perhaps they won’t care. We’ll soon see.

Nicky Richmond is managing partner at Brecher