How Bothered Should You Be About Rentcharges?

Paul Hajek | 12 May 2016

Update: this blog has now been updated, and you can view it here.rentcharges in bristol

We’ve had many enquiries about Rentcharges since I appeared on Radio 4’s “You and Yours”  a couple of years ago discussing their misuse.

I’ve posted several times since 2010 on this subject but a recent enquiry made me think it’s time for a review.

What is a Rentcharge?

Rentcharges (technically Rentscharge but let’s not be too pedantic, we’re friends after all) originated in the early part of the last century and were a means for builders to develop land without paying a premium to the owner of the Land.

Landowners would sell land to Developers at a reduced capital sum or for no money at all in return for an income from the owners of the new houses and their subsequent owners.

The person entitled to the Rentcharge is known as the Rentowner.

Rentcharges normally range between £2 and £10 per annum with the most expensive at around £12.60.

Rentcharges in Bristol

A Rentcharge is a peculiarity of Conveyancing in Bristol and surrounding towns and villages. In Manchester such payments are known as Chief Rents.

Estate Agents, in our neck of the woods, often use the term “freehold and free” in their property particulars and brochures. In this context “freehold and free” refers to a freehold house which is not subject to the payment of a Rentcharge.

Rentcharge Sell By Date 2037

The 1977 Rentcharges Act abolished the creation of all new Rentcharges, subject to a few exceptions, for example, small developments with shared facilities such as a pumping station or shared accessways.accessways.

The shelf-life for existing Rentcharges was capped at 60 years so that all relevant Rentcharges would expire in 2037.

The 1977 Act, for those who could not wait that long, by design or choice, permitted existing freehold owners, to buy out (or redeem as it is technically known) the Rentcharges attached to their property.

A Rentcharge should not be confused with a Ground Rent which only relate to Leasehold properties, especially, although not exclusively, to flats. You do not have an automatic right to buy your Ground Rent.

How Much Does It Cost To Redeem a Rentcharge?

If you know the identity of the Rentowner you can apply to the Department for Communities and Local Government to redeem the Rentcharge.

The cost of redeeming the Rentcharge will be about 16 times the yearly payment.

The address to write to or download the application form on line is:

Rentcharges Unit:

Department for Communities and Local Government, Ground Floor, Rosebrae Court, Woodside Ferry Approach, Birkenhead, Merseyside, CH41 6DU.Rosebrae Court, Woodside Ferry Approach, Birkenhead, Merseyside, CH41 6DU.

Are There Any Problems with Rentcharges When Selling Your Property

Inflation has eroded any financial advantage for Rentowners.

Many homeowners have been paying the yearly rentcharge although many may have forgotten to pay, not been asked to pay or not known who to pay.

As Conveyancing Solicitors, we often have to deal with problems where there is no evidence of payment of the Rentcharge on the sale of a property.

Conveyancing Solicitors in Bristol normally agree on an apportionment from the sale price of 6 years (the limitation period for a debt) Rentcharge payments roughly between £15 and £75.

No big deal then?

“But, I’ve Heard of a Rentcharge Trap, Is That Correct?”

We know of some abuses by Rentowners deliberate or otherwise.

The owner of a house in Bristol, which was subject to a Rentcharge, had a Lease registered against his property by a company called Morgoed claiming he had an unpaid Rentcharge liability.

The house owner had received a Rentcharge demand from Morgoed. He had been paying his Rentcharge annually ever since he bought the property to another person.

He naturally asked for proof of ownership before paying the Rentcharge to someone else. No proof had been provided.

Morgoed used the little-known Section 121 (4) of the Law of Property Act 1925 to create a Lease on his property as security for debt of the £16.50 unpaid Rentcharge.

The company had rejected the £16.50 offered in full payment of the outstanding Rentcharge.

The homeowner was effectively held to ransom as the company’s Lease would have to be removed before a sale could be completed.

What Morgoed did was considered perfectly legal at the time (although unchallenged in the Courts), but hardly proportionate.

The Good News About Rentcharges

The brave homeowner fought back and challenged the dubious use of the Lease to enforce the Rentcharge debt.

Luckily, the Court was having none of it and decided in favour of the homeowner.

The technical bit: the Court decided that

            “The lease …is not registrable at HM Land Registry as a lease because it is a mortgage (within sections 3(5) and 4 (5) of the Land Registration Act 2002) and can only be protected on the register by a notice.”

The company could not ask for any additional monies over and above the outstanding Rentcharge debt.

The judge did not temper his opinion when he stated:

            By the Applicants (Morgoed) unreasonable conduct in these proceedings and in persisting in charging unreasonable sums as a condition for redeeming the Rentcharge I see no reason why the standard order for costs (against Morgoed) should not follow the failure of the application.”

So, Morgoed will no longer be able to extract exorbitant fees to pay off a Rentcharge debt. Morgoed’s ruse of creating a Lease had been rumbled.

“I’ve Received a Letter Asking Me Would I Like To Buy The Rentcharge.”

An Enquirer had received a letter from an Estate Agent acting for the Rentowner and was asked would he like to purchase the Rentcharge for £750

We were asked whether £750 was a good deal or not.

The Rentcharge in question amounted to £2.64 per annum.

The cost to redeem under the 1977 Rentcharge Act would be about 16 times the yearly payment.

So, approximately, £43.

We responded in the negative and advised him to contact the Department for Communities and Local Government.

How To Avoid Rentcharge Headaches Happening To You.

  1. First, check your deeds to see if your property could be subject to a Rentcharge. If you are unsure check with your Conveyancing Solicitor or the Land Registry.
  1. Make sure you pay your Rentcharge on time whether demanded or not and ask for a receipt.
  1. Set up a Standing Order if possible to avoid overlooking payment of the Rentcharge.
  1. If you were paying a Rentcharge but it has not been demanded check with your neighbours to see if they have any information.
  1. If you receive a new demand for a Rentcharge ask for documentary proof from the purported new Rentowner and ensure your request by mail is “Signed for”.
  1.  Best of all, buy out and redeem your Rentcharge through the Department for Communities and Local Government as it will save potential hassle and additional cost later on when you sell your house.
  1. If the Rentowner tries it on or attempts to threaten you with a Statutory Lease tell the Company, as we lawyers say with the greatest of respect, to go forth and multiply.
  1. Selling your home with an existing Rentcharge will not be a barrier to a successful sale.

Are you bothered?

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