What is a Rentcharge?
In the late 19th and early 20th century Rentcharges (often called Chief Rents in Manchester) were a popular way for land owners of selling land to developers at a reduced fee. In the stylee of the leasehold world, the developer would buy the land for discounted fee and the land owner who was selling, would introduce an annual Rentcharge that they would receive from the purchasers of the properties forever more.
The rentcharges were for an annual set fee which at the time was worth having but over the years’ inflation has made these annual payments worthless. Typically, Rentcharges tend to be from £2 to £10 per year, so not worth even worrying about, right? Well, a recent Upper Tribunal decision shows that you should be very concerned about them.
The law around Rentcharges
The law around these archaic charges are complex but it is the legal remedy given to the owners of these rent charges, if the charges were not paid, that is so concerning.
Firstly, it is not mandatory that owners of these Rentcharges should register the ownership of them on the Land Registry which makes finding out who owns yours a task in itself.
There is no legal obligation for the owner of your Rentcharge to make a formal demand to to you for the payment of them, instead the obligation is on you to pay them each year. I’m sure you can see the issues surrounding them are becoming clearer already.
In fact, the obligations placed on a property owner who owes a Rentcharge include:
“to raise and pay the annual sum and all arrears thereof due or to become due, and all costs and expenses occasioned by non-payment of the annual sum, or incurred in compelling or obtaining payment thereof, or otherwise relating thereto, including the costs of the preparation and execution of the deed of demise”
So not only do you have to pay the Rentcharge but also “all costs and expenses” incurred if the payment is not paid. There is no legal obligation on the owner of the Rentcharge to make these “costs and expenses” reasonable.
What is really worrying is disproportionate remedies given to the holder of the Rentcharge should arrears occur.
Firstly, they have the “right to take possession” (forfeiture) of your property or they have the “right to create a trust of a lease of the land” to pay off the arrears (explained below).
The case of Roberts v Keegan
So let’s have brief look at the recent case which highlights how important this can be to a home owner who has a Rentcharge on their property.
Mr Keegan had a Rentcharge on his property of £2.75 a year. In 2003 a company called Morgoed Estates Limited, which is run by a Mr Jonathan Howard Roberts, became the Rent owner.
Margoed sent out demands to Mr Keegan but the letters were addressed to “The occupier” and so chances are Mr Keegan binned them as we all do when we receive junk mail.
Margoed then Served a possession order on Mr Keegan’s property!
Mr Keegan then phone Mr Roberts (the call was described as somewhat contentious, I’ll bet!). Mr Keegan demanded some proof that Mr Roberts did indeed legally own the Rentcharge.
Following the heated call Mr Keegan was sure it was agreed that if he paid the arrears (but not the £60 ‘admin’ fee) it would all be sorted out. Mr Roberts, however, did not recollect agreeing those terms. Back and forth correspondence ensued.
Then in 2005 Morgoed exercised their s121(4) power and granted themselves a lease for a term of 99 years on the property said to “Demise to secure payment of Rentcharge”.
In simple terms this lease granted and registered on the Land Registry acted as a charge on Mr Keegan’s property which meant he could not sell it nor re-mortgage it until he had negotiated a fee to pay it off. His property was now being held hostage for an £11 ‘debt’.
Mr Keegan took his case to the First tier Tribunal to remove this charge and won the case and then Mr Roberts appealed and the Upper Tribunal overturned the decision and Mr Roberts and Margoed inexplicably won.
How important are Rentcharges?
As you can see a £2.75 debt could see your property held hostage and your only escape is to negotiate with the sharp owner of your Rentcharge to release yourself. Keep in mind that there is no legal obligation for the charges applied by the person who owns your Rentcharge to be reasonable.
This is not the first case Margoed has taken to tribunal involving registering the charge leases on properties with Rentcharge debts in this manner (click here) so one can only assume it is a business model of theirs. Either way a cursory Google search of Morgoed Estates Limited and Mr Jonathan Howard Roberts himself will quickly lead you to your own conclusions.
What can you do about it?
In 1977 the Rentcharges Act abolished the creation of all new Rentcharges (except for a couple of cases) and also said that all Rentcharges would expire in 60 years. (So by 2037).
The case above shows that it may not be prudent to wait that long though and the good news is that it is very easy to pay off your Rentcharge now and get rid of it once and for all.
The DCLG have very useful information on how to buy it out and their forms are very easy to use and it will cost you 16 times your annual Rentcharge to do it.
Also ridding your title of a Rentcharge is a good way of clearing up your land title for any prospective purchasers of your property and their solicitors.
With the details of the case above and the knowledge that many “investors” of Rentcharges may be looking to extract as much money as possible from their “investment” before they expire, the time is now for you to get rid of this legal nightmare once and for all.
Cartoon used from http://www.addinghamcivicsociety.co.uk/the-tip-of-the-iceberg/
©Barcode1966 – 2017