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Beware The Perfectly Legal Rentcharge Scam

View profile for Paul Hajek
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We’re looking at problems and pitfalls you may encounter on your Conveyancing journey.

Welcome to Chapter 17 of our Series, your Conveyancing Questions Answered All in One PlaceRentcharges and Chief Rents Scams

Rentcharges in Bristol, Chief Rents in Manchester

Estate Agents, in our neck of the woods, often use the term “freehold and free” in their property particulars and brochures. In this context “freehold and free” refers to a freehold house which is not subject to the payment of a Rentcharge.

Although applicable to only affects certain parts of the country such as Bristol, Bath, Manchester and Sunderland, there is a particular problem we think you should know about and be prepared.

What is a Rentcharge?

Rentcharges (technically Rentscharge) originated in the early part of the last century and were a means for builders to develop land without paying a premium to the owner of the Land.

Landowners would sell land to Developers at a reduced capital sum or for no money at all in return for an income from the owners of the new houses and their subsequent owners.

The person entitled to the Rentcharge is known as the Rentowner.

Rentcharges normally range between £2 and £10 per annum with the most expensive at around £12.60.

Rentcharge Sell By Date 2037

The 1977 Rentcharges Act abolished the creation of all new Rentcharges, subject to a few exceptions, for example, small developments with shared facilities such as a pumping station or shared accessways.

The shelf-life for existing Rentcharges was capped at 60 years so that all relevant Rentcharges would expire in 2037.

The 1977 Act, for those who could not wait that long, by design or choice, permitted existing freehold owners, to buy out (or redeem as it is technically known) the Rentcharges attached to their property.

A Rentcharge should not be confused with a Ground Rent which only relates to Leasehold properties, especially, although not exclusively, to flats. You do not have an automatic right to buy your Ground Rent.

How Much Does It Cost To Redeem a Rentcharge?

If you know the identity of the Rentowner you can apply to the Department for Communities and Local Government to redeem the Rentcharge.

The cost of redeeming the Rentcharge will be about 16 times the yearly payment.

The address to write to or download the application form online is:

Rentcharges Unit:

Department for Communities and Local Government, Ground Floor, Rosebrae Court, Woodside Ferry Approach, Birkenhead, Merseyside, CH41 6DU.

What is the Rentcharge “Scam”?

Rentcharges have been innocuous for many years.

Inflation has eroded the impact of the annual charge.

However, many rentcharge conveyancing deeds state that the charge or rent be payable annually “whether formally demanded or not”.

The problem arises when there has been no formal demand or the Rentcharge or Chief Rent has remained unpaid.

Some Rentowners have used the little-known Section 121 (4) of the Law of Property Act 1925 (the LPA)  to create a Lease as security for payment of its Rentcharge rather than pursuing its debt through the Courts.

The 1925 Act also permits the Rentowner to claim its fees for creating the Lease and a payment for the removal of the Lease as well.

Unfortunately, there is no requirement in the Act for the fees charged to be reasonable.

The fees could easily run into thousands of pounds if the Rentowner so chooses.

A Comprehensive Guide to Rentcharges and the Rentcharge Scam

We have recently posted at length about this issue.

You can see our comprehensive post on Rentcharges HERE.

Rentowners, including a growing number of Investment Companies, have used non-payment as a trigger to impose draconian penalties on unsuspecting homeowners.

We have drawn up a plan for you to avoid falling into this Rentcharge Trap.

8 Tips To Avoid the Rentcharge “Scam” Happening To You.

The Rentcharge “scam” is a very real one, and legal!

There are a few things you can do to minimize your risk of being caught in the “scam”

1. First, check your deeds to see if your property could be subject to a Rentcharge. If you are unsure check with your Conveyancing Solicitor or the Land Registry.
2. Make sure you pay your Rentcharge on time whether demanded or not and ask for a receipt.
3. Set up a Standing Order if possible to avoid overlooking payment of the Rentcharge.
4. If you were paying a Rentcharge but it has not been demanded check with your neighbours to see if they have any information.
5. If you receive a new demand for a Rentcharge ask for documentary proof from the purported new Rentowner and ensure your request by mail is “Signed for”
6. Be prepared to pay an Administration fee for proof (however unpalatable) to avoid paying hundreds of pounds later if a Statutory Lease is registered against your property.
7. If your Rentowner is Morgoed or other “investment companies” make sure you never miss a payment not even when you were not prompted to pay. Companies like Morgoed exist to make money out of unsuspecting homeowners with Rentcharge liabilities from dubious administration fees and/or payment defaults.
8. Best of all, redeem your Rentcharge through the Department for Communities and Local Government as it will save potential hassle and additional cost later on when you sell your house.

Don’t fall into the Rentcharge Trap and turn the non-payment of a few pounds into a Conveyancing Nightmare.

Your Conveyancing Questions Answered - All In One Place

 

 


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