Conveyancing Solicitors sometimes come across Freehold properties that attract a yearly rent. Needless to say this is very confusing for most clients as the payment of rent is normally associated with leasehold properties. Here are answers to some of the questions that often arise:
What is a rentcharge?
The owners of some freehold houses are required to pay an annual amount, which is called a ‘rentcharge’ (sometimes known as a ‘chief rent’). There are two common situations where this arises:
- Traditional rentcharges – these are usually only encountered in the Greater Manchester area and in parts of North Somerset and Bristol. They will often have been imposed many years ago, and the amount payable is normally very small.
- Estate rentcharges – these may be encountered in any part of the country, and have become more common in recent years on residential estates where they are used as a way of recovering costs for maintenance of shared facilities such as private roads.
Rentcharges are so called because they are ‘charged’ on (or ‘issue out of’) the land – in other words they are payable by whoever owns the land for the time being, rather than being a personal debt payable by the original buyer.
The ‘rent’ element means that the payment accrues on a yearly basis in the same way as the rent due under a lease. The right to receive a rentcharge is a separate property right, which can be sold or transferred on the death of the original owner.
The land registry can register such rights as a separate title, but the absence of registration does not mean that they do not exist.
Can I do anything to get rid of the rentcharge?
By agreement: The owners of homes affected by some of these charges may be informed that the owner wants to sell, in which cases they may buy out or ‘redeem’ the charge by paying the required amount. Alternatively you can write to the rentcharge owner asking if they would be willing to redeem your charge.
Anyone redeeming their rentcharge should also ensure that they obtain a formal deed, as this will be required when the property is sold. It is recommended that advice is sought from a Conveyancing Solicitor who will be able to ensure that the correct procedures are followed so that there are no difficulties on a sale.
Under Statutory provisions: The Rentcharges Act 1977 contains provisions enabling a unilateral application to be made. Applications should be sent to the Department for Communities and Local Government, Rentcharges Team, 4th Floor, One Piccadilly Gardens, Manchester, M1 1RG.
You will still need to make a single payment, but if they can process your application then on payment they will issue a ‘redemption certificate’ which should be kept safely.
However you cannot make such an application if the owner of the rentcharge is unknown or if you cannot obtain a copy of the original deed imposing the charge. Many of these charges date back to the eighteenth and nineteenth centuries so this can be difficult, but Conveyancing Solicitors familiar with Conveyancing in your locality can assist.
Can all rentcharges can be redeemed?
No, the 1977 Act does not allow ‘estate’ rentcharges to be redeemed, as they operate for the benefit of all the owners on an estate.
Estate rentcharges are often imposed when a new development comprises a mixture of leasehold flats and freehold homes, which all have the benefit of shared facilities. The leases can provide for the leaseholders to contribute to maintenance costs by way of an annual service charge, so similar provisions must also apply to the freeholders.
This is done by reserving a small fixed charge, together with a variable charge which will collected in the same way as a service charge.
Will the rentcharge expire in the future?
At common law rentcharges continued ad infinitum, with no date of expiry. However the 1977 Act provided that, except for estate rentcharges, they will generally expire 60 years after the date on which the Act was passed. In the meantime they continue to be payable and a rentcharge owner can use legal remedies to recover arrears.
No payment has been made for years – do I still have to pay?
Freeholders may sometimes receive demands for extensive arrears dating back to the time before they purchased the property. If this happens the they can only legally demand up to six years back-payment.
As the benefit of rentcharges can be sold, occasionally investors acquire them thinking that they comprise the freehold reversion on leasehold properties. In such cases they may write to owners threatening legal action which would be totally inappropriate.
In any such cases it is recommended to seek advice from the Conveyancing Solicitor who acted when you purchased the property.
I only own part of the land subject to the Rentcharge – can I get a formal apportionment?
Many rentcharges, especially those in the Manchester and the North-west, were first imposed by landowners selling fields for development.
These original fields are now covered with houses and other buildings which have all been sold off separately. Sale deeds will often contain a provision apportioning the amount charged – for instance if the whole field was subject to payment of £10, and 100 houses were built on it then the £10 would be divided up so that an individual house would only be subject to paying 10p. (although it is rarely that simple!)
However unless the rentcharge owner agreed to each of these apportionments he could legally claim the whole amount from the owner of any of the houses. This would obviously be much easier for him. However individual owners can apply to the Department for Communities and Local Government, Rentcharges Team, 4th Floor, One Piccadilly Gardens, Manchester, M1 1RG
http://www.communities.gov.uk/publications/housing/apportionmentrents for an Order of Apportionment, which will fix the amount you have to pay.
How can I get further advice and information?
For specific advice it is best to contact Conveyancing Solicitors who are familiar with your area.
The Department for Communities and Local Government has various advice leaflets available from their website.
Information about leasehold houses and service charges can be obtained from the Leasehold Advisory Service.