Rentcharges – welcome changes to the law now up and running

Rentcharges have long been a bugbear for people buying certain older properties in the Bristol, Weston-super-Mare and North Somerset areas.

A rentcharge is an annual fixed sum or ‘rent’ paid by the owner of freehold land, the homeowner, to a third party (the rentcharge owner) who has no legal interest in that land. The creation of new rentcharges (subject to certain exemptions) was banned in 1977.

Usually very small amounts of money – between £2 and £10 a year – rentcharges can appear insignificant but problems have arisen in the past when the rentcharge owner has sought to enforce historic unpaid charges using legislation that provided them with automatic rights where the charge was unpaid (whether or not it was demanded by the rentcharge owner).

Going forward, however, The Leasehold and Freehold Reform Act 2024, will regulate how rentcharge arrears can be collected, hopefully ending this kind of issue and making properties subject to a rentcharge less objectionable to mortgage lenders (although each lender will have their own instructions as to how they will deal with properties that are affected by these historic rentcharges).

• Rentcharges, not to be confused with ground rents, can be a bit of a minefield when it comes to buying and selling property as some lenders won’t go ahead if there’s one in place. This is where our highly experienced Conveyancing Specialists – who all have extensive knowledge of the local areas in which they work – can advise you on the best way forward.

What is a rentcharge?

Rentcharges were a way for builders to develop sites without paying a premium to the owner of the land.

The landowner would sell the land at a reduced capital sum, or even give it away, in return for a regular income (the rentcharge) from the owners of the new houses built on it and subsequent owners.

Rentcharges remain attached to a property indefinitely although the Rentcharges Act 1977 abolished the creation of new rentcharges, (subject to certain extensions). This means most rentcharges will expire automatically by 22 July 2037.

Do you have to pay rentcharges?

Although often just a nominal sum, it is important to keep on top of payments although this is sometimes difficult when it’s no longer clear, because of the passage of time, who the rentcharge owner actually is.

The deed establishing the rentcharge can also create other obligations, like the need to obtain consent from the rentcharge owner for alternations and additions to the property, for instance.

This can be a complicated area of the law and specialist advice on your individual circumstances is advisable.

What rentcharge changes does the new legislation bring?

The Leasehold and Freehold Reform Act 2024 amends Section 121 of the Law of Property Act 1925. It was this legislation that caused a significant number of issues with rentcharges in the past due to the draconian measures that were available to rentcharge owners where the rentcharge had not been paid.

The new rules apply to rentcharge payments due since 27 November 2023 and basically put the onus on the rentcharge owner to take certain measures including:

• Serving a formal notice on the property/landowner before seeking payment. This must be delivered either by hand or registered post to the property affected by the rentcharge.
• Providing evidence of ownership of the rent charge, how the amount has been calculated and details of how to pay the amount due. No additional fee can be demanded of the property owner for providing this information.

What should you do if your home has a rentcharge on it?

If the rentcharge has not been collected for 12 years, a seller or property owner can swear a statutory declaration to that effect and apply to the Land Registry to say the rent charge is statute barred as the non-payments show.

If your rentcharge is being collected, you can negotiate to buy this out or if this isn’t possible, apply for a statutory redemption to buy it out.

If a rentcharge owner emerges, ensure payment is made.

Get in touch

Wards Solicitors knows the lie of the land when it comes to rentcharges in Bristol and the surrounding areas.

Endorsed as a South West leading firm in the independent Legal 500 list for 2024, our lawyers have received overwhelmingly positive testimonials from clients.

Our expert and highly regarded Conveyancing Team work across all 13 of our local offices in Bristol, South Gloucestershire, Bath and North East Somerset and North Somerset. Please don’t hesitate to get in contact.