It is a hangover from the reign of Henry VIII, described by one barrister as a blot on the legal landscape. But at a time when the Church of England faces immense repair bills for its parish churches, it is regarded by some vicars as a godsend.

A quirk of the statute books has left a legal liability for thousands of homeowners who may be required to pay for the repair of church buildings. The liability, known as chancel repair, has required one couple to pay more than £200,000 towards the upkeep of their parish church.

The country's 16,000-plus Church of England churches have now been urged to investigate whether they could benefit from the law. At least a quarter of dioceses have been looking into the issue, according to an insurance industry source.

Chancel repair liability enables approximately 5,200 pre-Reformation Church of England and Church of Wales parishes to demand money from owners of particular properties on former monastery land, to fund repairs to their church buildings. These homeowners are called lay rectors, and they are liable for keeping the chancel - the space around the altar at the liturgical east end of the building - wind-proofed and water-tight.

Churches have begun pursuing claims since the House of Lords ruled that Andrew and Gail Wallbank had to pay £186,986, plus VAT, towards the upkeep of St John the Baptist church in Aston Cantlow, near Stratford-upon-Avon. They also had to stump up legal costs of around £220,000. They own a nearby farmhouse which brought with it the legal requirement.

Despite the ruling last year, the Wallbanks have yet to pay a penny to the parochial church council (PCC) because of more wrangling over the archaic liability.

Establishing is liable is difficult as there is no register. As one barrister told the Guardian: "Chancel repair liability is a blot on the legal landscape. It is hard to discover, its enforcement can be capricious, and the extent of the liability may exceed the value of the land burdened. It is wholly unsatisfactory that this form of liability should still exist in 2008."

The Law Commission in 1985 recommended the liability be abolished, but the government rejected the proposal.

It is clear why the church isn't keen for it to be annulled. According to a 2006 English Heritage report, the Church of England spends £120m a year on repairs, and the backlog of repair bills for all listed places of worship in England is an estimated £925m over five years, or £185m a year.

In the wake of the Wallbank case, the Legal Advisory Commission, which advises Church of England dioceses on matters of law, issued national guidance on chancel repair rights which suggested PCCs had an obligation to investigate whether parishioners could be billed for chancel repair works.

The document said: "A PCC is a charity so its members are subject to the usual duty of charity trustees to exercise their powers in its best interests. They cannot therefore simply choose not to enforce chancel repair liability."

But it also noted that in many cases the bad publicity from enforcing the law could be counter-productive. It said enforcing chancel repair liability could hamper the PCC's "ability to pursue its object of promoting in the parish the pastoral mission of the church, or by alienating potential financial support".

Establishing whether liability exists with an individual is painful enough, let alone billing them, according to Andrew Johnson, registrar of the diocese of Salisbury. "From a pastoral point of view it's an unpleasant task," he said.

There is, however, one apparent winner in this affair, and that is the insurance industry. Insurance offering protection against being landed with a bill to repair the local church chancel has existed for many years. But until the Wallbanks' case, hardly anyone took out such cover.

Some people question the worth of these policies. Tim Berry, registrar of the diocese of Bristol and Bath and Wells, said: "Insurance companies have jumped on the bandwagon. They flag it up and solicitors have to warn mortgagees, and they panic and want cover. If you search small cities, a vast number will probably be burdened with potential, but tiny, liability."

Happily, the situation is likely to become clearer. From October 2013, chancel repair liability will only bind buyers of registered land if it is referred to in the land register.

Blame Henry VIII

Andrew and Gail Wallbank have Henry VIII to blame for their troubles. Chancel repair liability dates back to the monarch's decision to dissolve the monasteries when he made himself the supreme head of the Church of England in 1534. Before then, many monasteries employed a rector who was responsible for repairing the eastern end of the church, which holds the altar. The Wallbanks say they cannot pay the £186,986 repair bill for St John the Baptist church - in which they were married - unless they sell up. The problem, according to Mr Wallbank, 68, is that they are finding it impossible to sell the farm while it carries this liability. "We accept that we have to pay, but the simple fact is that we have no means of doing so without selling the farm." The Wallbanks have been given a deadline of February 16 2009 to pay, in time for building works on the chancel to begin in March.