There are two common types of rentcharges; historic and estate. These are usually found on freehold properties but can occasionally be found on a leasehold property.

Historic rentcharges are usually a fixed sum, payable annually and set out as such within the legal title. The Rentcharges Act 1977 put an end to historic rent charges being created.

Estate rentcharges can be fixed or variable and are payable in return for services such as maintenance of the communal areas on an estate.

Where there is a fixed rentcharge and it was dated prior to 22nd August 1977, this is likely to be historic.

Any variable or fixed rentcharges from 22nd August 1977 are likely to be estate rentcharges.

Why is a rentcharge different to a management fee/ ground rent?

The difference between a rentcharge and a management fee or ground rent is the rights of enforcement that the rentcharge owners have.

  1. Right of re-entry – If the rentcharge goes unpaid for forty days, whether demanded or not, under Section 121 of the Law of Property Act 1925 allows a rentcharge owner to enter into possession of the land and hold any income from the same until the arrears have been settled or;
  2. Grant a lease – the Rentcharge owner can grant a lease against the land in question to recover the rent and arrears along with any associated costs relating to the same.

These powers apply under Section 121 unless they are detailed to be excluded within the deeds and many lenders will require these powers to be excluded in order to proceed.

Can you remove a rentcharge?

There are several ways a rentcharge can be removed from a title:

  • The rentcharge can be redeemed. This is a lump sum payment to release you from the obligations of the annual fee and can result in a simple receipt, a deed of release or can be noted within a conveyance or transfer of the property. There is also the option to complete a statutory redemption. This is on the basis that the rentcharge has been collected, or the rentcharge owner is known and can be a fairly long process.
  • Absent historic rentcharge owners. A property owner may be able to apply for adverse possession if the rentcharge goes unpaid for 12 years.

Can you proceed without the removal of a rentcharge?

If the owner of a historic rentcharge is absent then it is common that lenders will require an indemnity policy to provide cover to the title should the rentcharge owner enforce their right of re-entry due to non-payment of the rentcharge.

A similar indemnity can be obtained for an estate rentcharge however this only provides cover for the lender and it would be dependent on the lender as to whether they would accept this.

Most lenders will ask for a deed of variation to be entered into with the estate rentcharge owner to exclude the enforcement powers under Section 121 of the Law of Property Act 1925.

Next Steps...

If you have any questions regarding rentcharges or any other Conveyancing matters, please do not hesitate to contact me at l.bourne@timms-law.com or call 01530 564498.

For more information on Conveyancing, visit our webpage here.