Raising the roof
A chancel claim on a commercial property proves that legal indemnities are far from being money for old rope.
We were contacted in February 2018 by a solicitor acting on behalf of Mr K, who owned a large commercial warehouse in the West Midlands. Mr K had owned the property for a number of years, but when he re-mortgaged in 2017, his solicitor recommended he take out a chancel repair policy as he had discovered that the title was now subject to a Unilateral Notice in respect of a liability to repair the chancel.
The protective Notice had been placed on the registered title in favour of the local Parochial Church Council (PCC), and because this reinforced an existing liability and potentially increased the risk of a future claim, we investigated the circumstances before deciding whether or not to offer a quote. After some research, we discovered that the property was in a very built up area and located some distance from the church. In view of this, our underwriters felt that any liability would be heavily diluted and we were happy to provide a policy with a £500,000 limit for a premium of £495.
A steeple bill
In December 2018, Mr K received a letter from the PCC advising him that the chancel roof of the church was in need of over £90k worth of repairs. They pointed out that legally the responsibility had been assessed as ‘joint and several’; which meant that they could in fact hold just one plot owner responsible for the total sum, and it would be up to the owner to try and identify other possible owners to share the burden.
Fortunately for Mr K however, the PCC had considered this an unfair way of proceeding, and so instead they had identified 16 large plots that clearly bore the historic liability, of which Mr K’s property was one, and wrote to each asking for £5715. This was to be a one-off payment, and in return the PCC agreed to cancel the Unilateral Notice so no further payments could be demanded.
While the PCC was taking a fair approach, it was also being strict. Two of the other properties had initially responded to the demands saying they could not afford to pay, and the Church actually went as far as assessing their business accounts, and while it agreed one company could pay less, it insisted the other pay up in full anyway!
To pay, or not to pay
Having received notification of the claim, our in-house claims team’s initial decision was whether to accept the liability and pay the claim, or challenge its validity. This is a crucial moment in any claim and a thorough understanding of the background and all the facts is essential before making a judgement.
The PCC had produced a document confirming the background of the situation, based on specialist advice they had received prior to registering the Unilateral Notice. The actual tithe document confirming that Mr K’s property (along with the others) was subject to the liability dated from 1847 and was some 88 pages long. The PCC had sent Mr K a couple of relevant pages which they had extracted but these were hard to read. Despite this, the PCC also confirmed that all the other 15 landowners had already agreed to pay, and in doing so, some of them (including a large national charity) had instructed their solicitors to assess the documents.
On this basis we took a commercial decision to pay the amount demanded without seeking our own legal advice in this instance - instead relying on our own assessment of the limited documentation provided, and the fact that the solicitors acting for the other landowners had been happy to advise their clients to pay.
The best course of action
Had we demanded more information, this would only have delayed matters and racked up costly legal bills. Previous chancel claims that we’ve handled have demonstrated that the liabilities can be archaic and difficult to identify whether or not a liability definitely does exist.
This particular case clearly demonstrates the advantage of having a policy in place: from the time Mr K notified us of the claim to the moment when the money was paid into his account took less than 3 weeks.
Not only that, but the settlement included a letter from the Church, confirming that no further sums can be demanded from Mr K for any future repairs.
You may be surprised that we’re still seeing chancel claims but it simply proves how unpredictable legal indemnity insurance is and also reinforces the value of cover, because, if there is a valid claim to be made, someone will make it.