Understanding Rentcharges
Following a law case, the perception of rentcharges changed dramatically. Many landowners are only finding out about any potential issues when they come to sell the affected property, writes property lawyer Stephen Warren of Forbes
Rentcharges – why are they so problematic and why wasn’t I told about it?
The answer to the second of those questions will likely depend on when you purchased the property and what type of property you purchased. The perception of rentcharges changed dramatically following the case of Roberts v Lawton [2016] UKUT 395.
A rentcharge is an annual sum paid by the owner of freehold land to a third party. Not to be confused with the rent in a lease payable from tenant to landlord.
Rentcharges often secure very modest sums – less than £15, typically. Whether a rentcharge had been paid prior to Roberts v Lawton wasn’t something a property lawyer would have lost too much sleep over. That perception was shattered following that case. The case is a few years old, but it is likely that many landowners are only finding out about any potential issues now when they come to sell the affected property.
The reason Roberts v Lawton was so important is that it served as a somewhat brutal reminder of the draconian teeth that rentcharges had when it came to their enforceability. Under s121 of the Law of Property Act 1925, if a rentcharge has been unpaid for more than 40 days then the owner of the rentcharge can either enter into possession of the land and take the income from it until the amount due is paid or they are able to grant themselves a long lease over the property which will secure repayment of the rentcharge arrears and the cost of taking the enforcement action. These options are available whether the rentcharge was formally demanded or not. Following the case, many lenders viewed rentcharges in a different light with many now requiring a deed of variation to remove any possible enforcement under s121.
What can you do about it? That depends on whether the property is subject to a historic or estate rentcharge. Most people will understand estate rentcharges better as ‘service charge’ estate rentcharges. The advice of a property lawyer is crucial as not all payments for service charges on a freehold property will mean it is a rentcharge. It is vital to understand:
a) if your property is subject to a rentcharge and if so,
b) what type of rentcharge it is.
The majority of properties that have either type of rentcharge are likely to be sellable and mortgageable, but it may require some work on your part. Speak to a property lawyer to find out what you need to do but, in the meantime, if you know you have a rentcharge and you know who to pay it to, then simply pay it. It just isn’t worth not doing so.
To speak to a property lawyer, contact Stephen Warren on 0333 207 1130, or email: Stephen.warren@forbessolicitors.co.uk
