Rentcharges – what problems might these cause landowners?
Many believe that rentcharges are of little concern to landowners as they are generally minimal amounts of money, and the creation of new rentcharges was essentially stopped from 1977 onwards. However, a recent court decision has highlighted that this is not the case, as Tom Martin, trainee solicitor explains.
Many believe that rentcharges are of little concern to landowners as they are generally minimal amounts of money, and the creation of new rentcharges was essentially stopped from 1977 onwards. The recent decision in Roberts v Lawton [2016] highlighted that this is not the case.
A rentcharge is a periodic payment secured against land by way of a charge. If they fall into arrears by more than 40 days, the owner has various remedies available. One remedy is the granting of what is known as a “rentcharge lease”. This is a lease of the charged land, granted to trustees, who can take possession of the land and raise money to pay off the arrears and any costs incurred. Such leases were the subject of the Roberts case.
Roberts decision
Numerous landowners, who paid rent under rentcharges owned by Morgoed Estates Limited, fell into arrears. The arrears were no more than £15 each. Morgoed granted rentcharge leases over each area of land and sought to register them at the Land Registry, who referred the applications to the Land Tribunal.
The Upper Tribunal, following a contrary decision in the First Tier Tribunal which was appealed by Morgoed, found that:
The leases were capable of registration and;
A rentcharge lease continues in existence even after the arrears have been repaid, unless it is surrendered voluntarily.
Firstly, once a rentcharge lease is granted, the rentcharge owner becomes entitled to recover their costs. Given the generally small value of rentcharges, these costs are highly disproportionate. In Roberts, Morgoed sought to claim £650 for their costs.
Secondly, the fact that a rentcharge lease can continue indefinitely means that rentcharge owners can essentially make the rent payer’s land unsaleable, as it is subject to the lease until such time as the rentcharge owner agrees to surrender it.
The Judge in Roberts highlighted the obvious “draconian” nature of this remedy, however until the law in this area is reformed this remains perfectly legal. Best practice for landowners who are subject to a rentcharge is therefore to pay up to date and keep paying on time; or alternatively to redeem the rentcharge. The latter option removes the rentcharge altogether upon payment of an agreed lump sum.
If you have any questions about rentcharges, or you are seeking advice as to redemption, please do not hesitate to contact us.
