Estate rentcharges

Most rentcharges have their origins in the late 19th and early 20th Century, where a developer would buy the freehold land for less than market value and make up the deficit by granting the seller a rentcharge. The developer could then pass on the liability to pay the charge onto the new homeowners. The creation of these types of rentcharges was abolished under the Rentcharges Act 1977, although those still in existence will continue until 2037. A typical rentcharge is only a few pounds per year, but not paying this on time gives the owner of the rentcharges the options of a right of entry onto the land to hold the land and take income from it until the arrears have been discharged; or to grant a lease of the land charged on trust to raise arrears. These are enforceable if the payment is 40 days overdue and does not have to be demanded.

This case in Todays Conveyancer relays a landmark case in 2016 where non-payment of the rentcharges led to leases being granted on the land.

Estate rentcharges are similar, although these are a mechanism to pay for and maintain communal areas (roads, car parks, parks) in a new development. The creation of new Estate Rentcharges is an exception permitted by the Rentcharges Act 1977 and will remain enforceable after 2037. This story from the BBC explains how a family are struggling to sell their freehold house which is subject to an Estate rentcharge as a potential buyer was unable to secure a mortgage on the property. A number of developers are now moving away from Estate Rentcharges and creating a ‘contract based’ estate service charge regime which is not a rentcharge and therefore does not risk the enforcement measures detailed above.