Name resolution problem with local dns and local custom domain

Hi

I am trying to deploy charmed kubernetes. vSphere datastore issue is solved but now I am facing possible name resolution issues.

I have homelab01.local as a subdomain hosted on my dns server 192.168.255.220.

DHCP range is configured with my dns server and name resolution works.

However I see deployment issue:

Machine State DNS Inst id Series AZ Message
0 down pending focal Post “https://esxi.homelab01.local/nfc/5285bf92-8ce0-
9b89-76c3-a647e805c836/disk-0.vmdk”: dial tcp: lookup esxi.homelab01.local on 127.0.0.53:53: server m
isbehaving
1 down pending focal Post “https://esxi.homelab01.local/nfc/5294cd72-ea11-
6141-6e87-fd236df414a7/disk-0.vmdk”: dial tcp: lookup esxi.homelab01.local on 127.0.0.53:53: server m
isbehaving
2 down pending focal Post “https://esxi.homelab01.local/nfc/52bfc33a-924c-
ff21-b607-24252de120c6/disk-0.vmdk”: dial tcp: lookup esxi.homelab01.local on 127.0.0.53:53: server m
isbehaving
3 down juju-4f1711-3 focal poweredOn
4 down juju-4f1711-4 focal poweredOn
5 down pending focal cloning VM: 0.00%
6 down juju-4f1711-6 focal poweredOn
7 down pending focal cloning VM: 0.00%
8 down pending focal cloning VM: 0.00%
9 down juju-4f1711-9 focal poweredOn

I logged in into juju controller and I see following config:

ystemd-resolve --status
Global
          DNSSEC NTA: 10.in-addr.arpa
                      16.172.in-addr.arpa
                      168.192.in-addr.arpa
                      17.172.in-addr.arpa
                      18.172.in-addr.arpa
                      19.172.in-addr.arpa
                      20.172.in-addr.arpa
                      21.172.in-addr.arpa
                      22.172.in-addr.arpa
                      23.172.in-addr.arpa
                      24.172.in-addr.arpa
                      25.172.in-addr.arpa
                      26.172.in-addr.arpa
                      27.172.in-addr.arpa
                      28.172.in-addr.arpa
                      29.172.in-addr.arpa
                      30.172.in-addr.arpa
                      31.172.in-addr.arpa
                      corp
                      d.f.ip6.arpa
                      home
                      internal
                      intranet
                      lan
                      local
                      private
                      test

Link 2 (ens192)
      Current Scopes: DNS
       LLMNR setting: yes
MulticastDNS setting: no
      DNSSEC setting: no
    DNSSEC supported: no
         DNS Servers: 192.168.255.220
                      8.8.8.8
                      8.8.4.4
          DNS Domain: kubelab01.local

I can ping dns server ubuntu@juju-7ac43d-0:/etc/netplan$ ping 192.168.255.220 PING 192.168.255.220 (192.168.255.220) 56(84) bytes of data. 64 bytes from 192.168.255.220: icmp_seq=1 ttl=63 time=0.490 ms

What might cause the error in this deployment? Is this really the name resolution issue or something else?