As is widely known, at midnight on 12 October 2013, certain classes of property rights, such as chancel repair liability (CRL) lose their status as overriding interests under provisions of the Land Registration Act 2002. Once the status of the right as an overriding interest is lost, a purchaser of the land for valuable consideration will be able to take free from it. However, the loss of overriding interest status for a property right does not mean that the right ceases to be an interest. Where no disposition for value occurs after 12 October 2013, the land remains subject to the right, and the right remains enforceable against the owner, and registrable against the title.
Where the disposition for value after 12 October is a mortgage (or re-mortgage) the mortgagee will enjoy priority protection against a CRL that is not noted on the register by virtue of section 29 LRA 2002. Registration of a registered charge made for valuable consideration gives the charge priority over third party interests unless, at registration, the third party interest is either noted on the register, or overriding. CRL cannot be overriding after 12 October 2013, so if it has not been noted on the register by the time the charge is registered, CRL is postponed “to the interest under the disposition” – that is, postponed to the charge. Hence, the chargee has priority, and so too would the chargee’s buyer and all who claim through that line of transmission.
However, in such a case, the chargor (the current registered proprietor) will still remain subject to the liability unless and until there is a disposition for value by the registered proprietor. The mortgagee may therefore be persuaded by the borrower that the cost of insuring against a potential chancel repair liability no longer needs to be incurred, since the mortgagee’s interest will be free from the liability. Whilst it is true that mortgagees may well be able to acquire free from CRL after 12 October, it is worth considering how such a mortgagee will realise its security. If it exercises its power of sale (TR2 transfer), it can sell free from the right. But if it appoints a receiver to sell, and notice of CRL has been noted on the register after the date of the charge, but before the sale, as the receiver is the agent of the borrower, the transfer (TR1) would be subject to it. Given some mortgagees’ preference for selling through receivers, this is a point that may need to be taken into account when considering whether insurance requirements can be dropped.