What is a local land charge and what does a local land charges search show?
A local land charge is a financial charge or restriction placed on a piece of land or property, that can limit its use and bind successive owners. They are governmental in character and imposed by public authorities under statutory powers.
The existence of a local land charge would not normally be apparent from an inspection of land or from the register of title or title deeds. To discover whether a local land charge affects a property a local land charges official search would usually be carried out with the standard property searches at the outset of a transaction. An official local land charges search was traditionally carried out, as part of a local authority search. Land Registry are taking over the local land charges search function one area at a time and so by the end of the migration project they will complete all local land charges searches.
The local land charges search provides prospective purchasers with information about the property, such as:
- conservation areas;
- tree preservation orders;
- conditional planning permissions;
- compulsory purchase orders;
- financial charges;
- miscellaneous charges;
- listed buildings;
- light obstructions notices;
- section 106 agreements; and
- section 38 and 278 agreements.
It is however important to note that if a local land charge is not registered, it will still affect a purchaser in just the same way as it affected the original owner.
Delays experienced by Camden Council and other councils during the Coronavirus pandemic
There are currently long delays in obtaining local search results from a number of councils due to closures and business interruption caused by the coronavirus pandemic.
Even before the pandemic Camden Council’s local land charges department had a backlog of searches that started in spring 2019. Camden Council say this was a result of staff shortages, caused by a number of staff leaving at short notice and subsequent problems recruiting new staff. This led to significant delays in the Council providing local land charges search results. Camden Council have tried to rectify the backlog issue and turn around searches as quickly as possible. Prior to the coronavirus pandemic the turnaround time was a minimum of 10 weeks, with the Council returning fewer than 10 search results per week.
Timescales for residential conveyancing transactions can largely depend on the circumstances. The national average from instruction to completion is 10-12 weeks with exchange of contracts typically achieved within 6-8 weeks. However, significant delays in receiving property search results will affect these timescales.
Alternatives to an official local search/local land charges search
- Personal Search
An alternative to conducting an official local authority and land charges search, is to conduct a personal search. This is a search carried out by an independent search agent, who is separate to the local authority. When carrying out their search, a personal search agent will usually have access to and review the same documentation as the local authority would, and so the validity of the source information is the same. What is different, is the competency of the search provider. Although the majority of personal search agents are regulated, it is a not a compulsory requirement. A personal search does therefore carry a risk, and some risk averse lenders will not accept a personal search. One key reason is that a local authority must stand behind any incorrect search results. With a personal search the purchaser is reliant on the insurance cover which the agent has in place to cover any loss caused in consequence of an erroneous search result, for example a failure to reveal a local land charge that was in existence at the time that the search was made. With the recent delays in obtaining searches from Camden Council and other local authorities it is becoming more commonplace for a personal search to be accepted by lenders.
- Indemnity insurance
A further option available to a buyer is to put in place an indemnity insurance policy specifically designed for situations where searches are not obtained or there is a delay in the search results. The policy will usually cover both the buyer and any mortgage lender, if required. If on or after the date the policy commences, the buyer discovers any adverse matter which would have been revealed by a search had it been carried out or the result obtained prior to completion, the policy usually provides cover for the following:
- the amount of any financial charges registered against the property; and
- the reduction in the market value of your interest in the property.
Depending on the nature of the adverse matter, a reduction in the market value of the property might be difficult to prove. Search delay insurance would not enable a buyer to withdraw from the transaction with return of the deposit if an onerous search result was received post exchange of contracts, but prior to completion.
- Conditional contracts
If the seller is willing to do so, another option is to exchange contracts conditional upon satisfactory search results. If the local search reveals an onerous result the conditional contract should contain provisions which enable the buyer to pull out of the transaction with return of the deposit monies. These provisions are likely to be heavily negotiated in a commercial transaction. If the search result is satisfactory the matter would then proceed to completion in the usual way. Not all sellers would be happy to use a contract which is conditional upon search results as it creates a risk that the buyer could still pull out post exchange of contracts, or seek to use search results to withdraw from the transaction.
Greater investment in and improved resourcing at local authority level can only help to speed up the property buying process and make matters simpler for all involved.