A rentcharge is an historical means for a landowner to demand a financial charge to freehold property owners living on their land (or what was previously their land). This is different to a ground rent on leasehold properties, or an ‘estate rentcharge’ when each property owner in a development will pay towards the communal areas and facilities. The person who receives the rentcharge payment is known as the ‘rentowner’.
For registered properties, any rentcharge, details of the benefitting party and the amount payable should be noted in the ‘charges register’ of the title as this is a burden on the property which binds all owners of the property. For unregistered property the rentcharge will be noted in the ‘Conveyance’ or ‘Transfer’ deed which created the rentcharge and again will be binding on future owners. Subject to limited exceptions, since the Rentcharges Act 1977, no new rentcharges can be created, and most rentcharges will come to an end 60 years after they first became payable, or on 22 July 2037.
The issue with rentcharges is that if unpaid for a certain period of days (even if not requested or no notice given), there can be serious financial and practical consequences. The rentowner may have the power to either (a) take possession of the property until the amount and any costs and expenses in connection with the same have been paid, or (b) apply to the Land Registry for a lease over the property also gaining possession of the property and effectively leaving the property owner unable to live in the property.
The other issue is that some lenders will not lend on properties with rentcharges. At present, only a couple of mainstream or `High Street’ lenders will refuse to lend, but there is a feeling that more lenders may take this view in the future.
A property owner does have the following options available to avoid these issues:
- To obtain a fairly inexpensive indemnity insurance policy providing cover against the powers available to the rentowner. If this is the preferred option, no communication should be made with the rentowner or any party associated with them as this would invalidate any insurance available.
- To contact the rentowner to request variation of the deed creating the rentcharge to expressly exclude Section 121 of the Law of Property Act 1925 (the Act that gives the rentowner the power to exercise their rights as above). The property owner would usually have to bear their own fees as well as the rentowner’s fees using this method;
- To contact the rentowner direct to request redemption of the rentcharge and then paying the same; or
- To contact the Rentcharges Unit of the Ministry of Housing, Communities and Local Government with a completed request for redemption form and a copy of the deed creating the rentcharge. The Rentcharges Unit will then examine the application, make contact with the rentowner, calculate the amount due from the property owner to redeem the rentcharge and send payment instructions for the same – the payment must be made within 28 days from the date of those instructions. The property owner should ask for receipt of payment so that this can then be forward to the Rentcharges Unit who will provide a certificate of redemption. The property owner should then contact HM Land Registry to inform them of the redemption so the title can be updated accordingly.
WBW Solicitors has offices in Axminster, Bovey Tracey, Brixham, Chard, Exeter, Exmouth, Honiton, Launceston, Newton Abbot, Paignton, Seaton, Sidmouth, and Torquay.
This article is for general information only and does not constitute legal or professional advice. Please note that the law may have changed since this article was published.
