Guidance

Local Land Charges compensation protocol

Updated 21 April 2021

A protocol for dealing with compensation claims under section 10 of the Local Land Charges Act 1975 (as amended by the Infrastructure Act 2015), to identify where liability lies and whether any compensation paid may be recovered by HM Land Registry from the relevant local authority.

Agreed between HM Land Registry, the Local Government Association and the Welsh Local Government Association.

1. Introduction

Where a purchaser makes a material official or personal search of the Local Land Charges Register kept by the Chief Land Registrar prior to the purchase of a property, they will generally be entitled to compensation, under s.10 Local Land Charges Act 1975, as amended by the Infrastructure Act 2015, for the loss they suffer in consequence of the failure of the search to reveal a local land charge, that was in existence at the time that the search was made (together with reasonable associated costs incurred).

With the transfer of the statutory function for keeping the Local Land Charges Register for their area from a local authority to His Majesty’s Land Registry, pursuant to the Infrastructure Act 2015, claims for compensation under s.10 of the Local Land Charges Act 1975 in respect of the relevant local authority area will be made to the Chief Land Registrar, who may in specified circumstances recover any compensation paid under s.10 of the Local Land Charges Act 1975 from the relevant originating authority (generally, but not always, the local authority will be the relevant originating authority). There are four situations in which compensation paid under s.10 may be recovered:

1. Pursuant to paragraph 43 of Schedule 5 to the Infrastructure Act 2015, the Chief Land Registrar may recover compensation from a local authority that the Chief Land Registrar is liable to pay under s.10 where this is in consequence of a failure on the part of a local authority to register a charge, or to register a charge correctly, in the Local Land Charges Register that the local authority formerly maintained (or in consequence of a failure to provide the Chief Land Registrar with any information about such a charge).

2. The Chief Land Registrar may also recover compensation under paragraph 43 of Schedule 5 that the Chief Land Registrar is liable to pay under s.10 of the Local Land Charges Act 1975 where this is in consequence of the local authority’s failure to satisfy an entitlement to search in their LLC register conferred by s.8 of the Local Land Charges Act 1975, or in consequence of the omission of a local land charge from an official search certificate issued by the local authority, at a time when the local authority was still the registering authority for the relevant local authority area.

3. Pursuant to s.10(5) of the Local Land Charges Act 1975 (as amended), the Chief Land Registrar may recover compensation paid under s.10 where the liability is in consequence of the relevant originating authority failing to apply for the registration of the charge in time for it to be practicable for the Chief Land Registrar to avoid incurring the liability.

4. Pursuant to s.10(5A) of the Local Land Charges Act 1975 (as amended), the Chief Land Registrar may recover compensation paid under s.10 if the liability is in consequence of an error made by the originating authority in applying to register, vary or cancel a charge.

2. Protocol

The Local Government Association, the Welsh Local Government Association and HM Land Registry agree the need for a protocol to deal with claims that may arise to identify where liability lies and any compensation to be recovered by HM Land Registry from the relevant local authority.

The aim is to have a simple, fair, transparent and as far as is reasonably possible, non-litigious process for dealing with these claims expeditiously.

1. HM Land Registry receives claim which must be in writing.

2. HM Land Registry checks that relevant supporting information has been provided by the Claimant.

3. HM Land Registry undertakes investigation including whether there has been any loss to the Claimant purchaser in consequence of the non-registration of the charge or defective search.

4. HM Land Registry will make reasonable endeavours to notify the relevant local authority as soon as practicable following receipt of a claim where they may seek to recover any compensation paid under s.10 of the Local Land Charges Act 1975, setting out the reasons why they consider that the Chief Land Registrar may be entitled to recover any compensation that is paid. Submission should include details of the claim submitted, supporting information and any initial findings, together with all evidence held including, dates of actions/notifications, parties (who is the Claimant), a copy of the alleged “defective” search (or details of the charges revealed at the time that the personal search was undertaken, where the claim for compensation is made under s.10(1)(a) of the Local Land Charges Act 1975). The notification will be sent addressed to the relevant local authority’s legal department.

5. The local authority will acknowledge receipt of the notification in writing to HM Land Registry as soon as reasonably practicable and, in any event, within 7 days of receipt.

6. The local authority will make reasonable endeavours to provide the Chief Land Registrar as soon as practicable (and in any event within 6 weeks of the date of notification given to them by HM Land Registry) with a response to the notification that includes the following:

• (i) Notification, following consultation with their Insurance Companies, as to whether the local authority accepts the Claimant’s entitlement for compensation providing (where the entitlement to compensation is not accepted) full details of the basis on which the Claimant’s entitlement to compensation is denied.
• (ii) Confirmation as to whether the local authority accepts that the Claimant has suffered loss in consequence of non-registration or a defective search or the amount claimed to represent the loss suffered by the Claimant providing (where the entitlement to compensation or the amount of compensation claimed is not accepted) details of the basis on which entitlement to the amount of the compensation claimed is denied. The local authority will provide details of any mitigating factors where they consider that the loss suffered is not in consequence of the defective search or where they consider that the Claimant is or should otherwise have been aware of the relevant charge. Similarly, the local authority will provide details of any proposals that they have to compromise or remedy the position – for example by varying or cancelling a registration or by the grant of a retrospective approval.
• (iii) Confirmation as to whether the local authority accepts the Chief Land Registrar’s entitlement to recover the compensation paid from them providing (where the Chief Land Registrar’s entitlement to recover the compensation is denied) details of the basis on which the originating authority contends that the Chief Land Registrar will not be entitled to recover compensation paid under s.10 of the Local Land Charges Act 1975 in respect of the claim from them. Where the local authority is not the originating authority as regards the relevant charge and considers that the Chief Land Registrar’s liability is in consequence of an error or omission on the part of that other originating authority full details of the basis for this claim will be provided. (It is recognised that in some circumstances a local authority may not consider that there is any need for it to provide the information detailed in part (ii) where the Local Authority is certain that no entitlement to recover compensation from them can arise.)

7. Where the relevant local authority and HM Land Registry (the Parties) are not in initial agreement as to the entitlement on the part of the Chief Land Registrar to recover compensation, the Parties shall seek to resolve the matter between themselves by way of correspondence and or meetings within a reasonable period, which shall not exceed 10 weeks, and shall commence on the date when either HM Land Registry or the relevant local authority inform the other party that the period is to commence.

8. Alternative Dispute Resolution Mediation:

• (i) Where the Parties have not been able to resolve the dispute between them, legal action should be a last resort.
• (ii) The courts also expect legal action to be a last resort, so they would expect to see that that both Parties have considered whether Alternative Dispute Resolution may be a better way of dealing with the dispute.
• (iii) As an alternative way of dealing with the dispute, the Parties agree to enter into mediation in good faith to deal with such a dispute and will do so in accordance with, the Centre for Effective Dispute Resolution (CEDR) Model Mediation Procedure (the “Mediation”). Unless otherwise agreed between the Parties, within 14 working days of notice of the dispute, the mediator will be nominated by CEDR.
• (iv) To initiate the mediation a party must give notice in writing (ADR notice) to the other party(s) to the dispute, referring the dispute to mediation. A copy of the referral should be sent to CEDR.
• (v) Unless otherwise agreed the mediation will start not later than 21 working days after the date of the ADR notice.
• (vi) Apart from the mediator’s fees which shall be paid for by both Parties, each party shall bear its own cost of the mediation.

9. For the avoidance of doubt any settlement of a compensation claim by the Chief Land Registrar prior to agreement between the Parties shall not be regarded as automatic acceptance of liability by the local authority for the alleged error giving rise to the claim or the amount paid.

10. This protocol will be reviewed from time to time and at least annually updated as necessary, in consultation with the Local Government Association and the Welsh Local Government Association.