Buying property freehold is always regarded as a much better deal than leasehold because both the land and the property on which it stands will belong to you.
However, a little-known fee known as a rent charge could end up being an expensive outlay for a freehold-property owner.
Rent charges are a rarity, but they do exist in particular parts of England, such as around Bath, Bristol and Manchester, and when a buyer or their conveyancing solicitor fails to spot their presence in the title deeds, it may come back to haunt them.
Historic part of property sale
Introduced mainly in the late 19th and early 20th century, rent charges were put in place when landowners wanted to sell land at a reduced cost to developers. They would sell the land on a Freehold basis but would retain a legal interest in the land and charge an annual fee – or rent charge – in place forever. The rent charge was typically between £2 and £10, a figure that was reasonably high a century ago but is simply a peppercorn now.
In 1977, the rent charges Act ensured that any new property or land sold after that date and registered with the Land Registry would not have rent charges attached. Historic rent charges will end in 2037.
However, the Act did allow for some exceptions, such as newbuild free properties that can come with estate rent charges that apply across the whole estate. These will remain enforceable after 2037.
Ruthless enforcement of payment
The problem arises when a property owner is not aware of the rent charge due on their freehold. Many have fallen dormant, but others have been bought up by properties companies who are now ruthlessly enforcing payment.
The rent owner is entitled to recover any sums due but does not have to send a reminder to the freeholder that the rent charge is due nor chase a freeholder for payment. That allows the rent owner to impose a penalty after 40 days when the account inevitably falls into arrears, usually by taking out a statutory lease on the home as security. That would then make the property almost impossible to sell unless the freeholder pays thousands to redeem the lease.
In view of the recent decision in Robert and others v Lawton, a rent charge can now be redeemed. This can be done in one of two ways depending on whether or not it has ben collected:-
- If collected your conveyancer will need to immediately apply to the rent charge owner for the redemption certificate and then lodge it with the Land Registry.
- If not collected for a period of 12 years you can swear a statutory declaration to this effect. Your conveyancer will then need to apply to the Land Registry on Form CN1 and state “the rent charge has been determined by adverse possession as evidenced by the non-payments and this is now statute barred”. If your conveyancer does not include this wording, the Land Registry will misunderstand what you are trying to achieve.
For further advice on rent charges, please feel free to contact me on 0800 011 6666 or email legal@timms-law.com
