Rentcharge

Last updated

In English land law, a rentcharge is an annual sum paid by the owner of freehold land (terre-tenant) to the owner of the rentcharge (rentcharger), a person who need have no other legal interest in the land.

Contents

They are often known as chief rents in the north west of England but the term ground rent is used in many parts of the country to refer to either a rentcharge or a rent payable on leasehold land. [1] This is confusing because a true ground rent is a sum payable in relation to land held under a lease rather than freehold land. As a result, the first question a conveyancer or other adviser, such as the free Rentcharges Unit, will demand is information from the Land Registry, which the public can also obtain cheaply, as to whether the subjected land is freehold or held on a lease (a leasehold estate).

History

Rentcharge is a legal device which permitted an annual payment to be continually levied on a freehold property. A deed made with the parties' knowledge is legally effective against land to effect this and has been lawful since the 1290 Statute of Quia Emptores (18 Edw. 1). Such sums were originally payable to the local lord of the manor in perpetuity; however, a more common system of such lords was copyhold.

Function

Rentcharges provided a regular income for landowners who were prepared to release land for development, to the original builder, or in some cases a third party. The payments due are typically between £2 and £5 per annum, which are no longer a significant burden due to past price inflation. Sometimes the land was released without a capital sum being paid with the rentcharge being the only payment. Once imposed, a rentcharge continues to bind all the land even when the land is later divided and sold off in plots. In such cases one terre-tenant can be made responsible for paying the whole rent. That person is then left to collect the appropriate portion from the other terre-tenants whose land is subject to the rentcharge.

Rentcharges Act 1977

Rentcharges Act 1977
Act of Parliament
Royal Coat of Arms of the United Kingdom (variant 1, 1952-2022).svg
United Kingdom
Long title An Act to prohibit the creation, and provide for the extinguishment, apportionment and redemption, of certain rentcharges.
Citation 1977 c. 30
Territorial extent England and Wales
Dates
Royal assent 22 July 1977
Commencement 1 February 1978
Status: Current legislation
Text of the Rentcharges Act 1977 as in force today (including any amendments) within the United Kingdom, from legislation.gov.uk.

Section 2 of the Rentcharges Act 1977 (c. 30) [2] prohibits the creation of most new rentcharges except for 'estate rentcharges' (those for communal/own-property benefit).

Other parts of the Rentcharges Act 1977 [2] will abolish rentcharges of a feudal nature and provide a financial means to extinguish (way to redeem) any, regarding any freehold, by the freeholder, with or without the free assistance of the Rentcharges Unit of the Ministry of Housing, Communities and Local Government, Birkenhead, in the meantime. [3]

Rentcharges (Redemption Price) (England) Regulations 2016
Statutory Instrument
Royal Coat of Arms of the United Kingdom (variant 1, 1952-2022).svg
United Kingdom
Citation SI 2016/870
Territorial extent England
Dates
Made5 September 2016
Laid before Parliament7 September 2016
Commencement 1 October 2016
Other legislation
Made underRentcharges Act 1977
Status: Current legislation
Text of the Rentcharges (Redemption Price) (England) Regulations 2016 as in force today (including any amendments) within the United Kingdom, from legislation.gov.uk.

Any to be redeemed (ended) by the freeholder owning land subject to such a rentcharge, work out to as of 2023 very roughly 10 to 11 times (based on a capitalisation rate of 4.6%) the annual rentcharge set out in the property's title, specifically per the act's formula. The act has an optional procedure, enabled by Rentcharges (Redemption Price) (England) Regulations 2016 (SI 2016/870), in which the government's Rentcharges Unit assist without charge. [4] [5] To be ensured as effective the rentcharge must no longer appear on the subjected freehold's Register of Title.

There is a rare exception to this simple proof. Very few non-agricultural freeholds remain unregistered land and those that do may consider voluntary first registration.

Many rentchargers (owners of rentcharge) can make a private settlement with the freeholder (who is technically a terre-tenant, a rentcharge payer, a mildly incumbranced freeholder until redeemed/rentcharge expires/ends at abolition). [6] The act has a formula which enables Department for Communities and Local Government (DCLG) to calculate the redemption figure that the latter has to pay to redeem their rentcharge.

This is per the Rentcharges (Redemption Price) (England) Regulations 2016:

P = the redemption price;

R = the annual amount of the rentcharge (or, as the case may be, the rent to which section 20(1) of the Landlord and Tenant Act 1927 applies) to be redeemed;

Y = the maturity rate, expressed as a decimal fraction, of the “over-30-, not over 30.5-year” National Loans Fund interest rate published by the UK Debt Management Office; and

N = the period, expressed in years (rounding up any part of a year to a whole year), for which the rentcharge (or, as the case may be, the rent to which section 20(1) of the Landlord and Tenant Act 1927 applies) would remain payable if it were not redeemed. The point of longstop (longest date for this) will be 22 August 2037, thus longest period is that year minus the current gap in years, rounded up as to any part-year.

Rentcharges are extinguished on 22 August 2037; therefore in mid-2023, their lifetime is 14 years and if input into the formula above and using a yield of 4.6% the rate applicable in mid 2023 gives approximately 10.26 years of the rent to redeem it.

When the transaction has been completed DCLG, on behalf of the Secretary of State, issues a redemption certificate to the terre-tenant. [7] Any existing rentcharges other than estate rentcharges will be extinguished on 22 August 2037. [8]

Estate rentcharges

The 1977 act retained and continues to allow developers on sale to make appropriate estate rentcharges, those:

These are, thus, still a means of paying for/requiring desirable upkeep, such as ancillary communal maintenance and shared infrastructure. Within the UK, the regulation surrounding potential abuses (known as "fleecehold") has not kept pace with developments in the housing sector,[ citation needed ] but the government has consulted [9] on potential reforms.

As to leasehold land (such as flats), ground rent is the equivalent of the feudal-style of rentcharge; service charge is the equivalent of the estate rentcharge.

Related Research Articles

<span class="mw-page-title-main">Seigneurial system of New France</span> Semi-feudal manor system of French Canada

The manorial system of New France, known as the seigneurial system, was the semi-feudal system of land tenure used in the North American French colonial empire. Economic historians have attributed the wealth gap between Quebec and other parts of Canada in the 19th and early 20th century to the persistent adverse impact of the seigneurial system.

In English law, a fee simple or fee simple absolute is an estate in land, a form of freehold ownership. A "fee" is a vested, inheritable, present possessory interest in land. A "fee simple" is real property held without limit of time under common law, whereas the highest possible form of ownership is a "fee simple absolute", which is without limitations on the land's use.

In common law and statutory law, a life estate is the ownership of immovable property for the duration of a person's life. In legal terms, it is an estate in real property that ends at death, when the property rights may revert to the original owner or to another person. The owner of a life estate is called a "life tenant". The person who will take over the rights upon death is said to have a "remainder" interest and is known as a "remainderman".

The legal term apportionment, also called delimitation, is in general the distribution or allotment of proper shares, though may have different meanings in different contexts. Apportionment can refer to estate, the amount of compensation received by a worker and in respect of time.

A leasehold estate is an ownership of a temporary right to hold land or property in which a lessee or a tenant has rights of real property by some form of title from a lessor or landlord. Although a tenant does hold rights to real property, a leasehold estate is typically considered personal property.

As a legal term, ground rent specifically refers to regular payments made by a holder of a leasehold property to the freeholder or a superior leaseholder, as required under a lease. In this sense, a ground rent is created when a freehold piece of land is sold on a long lease or leases. The ground rent provides an income for the landowner. In economics, ground rent is a form of economic rent meaning all value accruing to titleholders as a result of the exclusive ownership of title privilege to location.

<span class="mw-page-title-main">Seignory</span> Lordship granted over an estate

In English law, seignory or seigniory, spelled signiory in Early Modern English, is the lordship (authority) remaining to a grantor after the grant of an estate in fee simple.

<span class="mw-page-title-main">Stamp duty in the United Kingdom</span> Tax charged on legal instruments

Stamp duty in the United Kingdom is a form of tax charged on legal instruments, and historically required a physical stamp to be attached to or impressed upon the document in question. The more modern versions of the tax no longer require a physical stamp.

A leasehold valuation tribunal (LVT) was a statutory tribunal in England which determined various types of landlord and tenant dispute involving residential property in the private sector. An LVT consisted of a panel of three; one with a background in property law ; one with a background in property valuation generally a qualified surveyor; and a layman, although some decisions of an LVT were decided by a single member. LVTs were non-departmental public bodies.

The total registered electorate in the United Kingdom grew from 5.7 million in 1885 to over 21 million in 1918. Much of the growth was result of the Representation of the People Act 1918, which expanded franchise by abolishing property qualifications for men and introduced female suffrage for some women over the age of 30.

<span class="mw-page-title-main">Freehold (law)</span> Legal term

A freehold, in common law jurisdictions such as England and Wales, Australia, Canada, Ireland, and twenty states in the United States, is the common mode of ownership of real property, or land, and all immovable structures attached to such land.

Building management is a discipline that comes under the umbrella of facility management. Hard services usually relate to physical, structural services such as fire alarm systems, lifts, and so on whereas soft services allude to cleaning, landscaping, security, and suchlike human-sourced services.

<span class="mw-page-title-main">Extinguishment</span> Destruction or nullification of a right or contract

In contract law, extinguishment is the destruction of a right or contract. If the subject of the contract is destroyed, then the contract may be made void. Extinguishment occurs in a variety of contracts, such as land contracts, debts, rents, and right of ways. A right may be extinguished by nullifying that right or, in the case of a debt, discharged by payment in full or through settlement.

In English and Irish law, a fee farm grant is a hybrid type of land ownership typical in cities and towns. The word fee is derived from fief or fiefdom, meaning a feudal landholding, and a fee farm grant is similar to a fee simple in the sense that it gives the grantee the right to hold a freehold estate, the only difference being the payment of an annual rent and covenants, thus putting the parties in a landlord-tenant relationship.

Marriage value, also called synergistic value, is a concept in property valuation. It is defined by the Royal Institution of Chartered Surveyors as "an additional element of value created by the combination of two or more assets or interests where the combined value is more than the sum of the separate values".

<span class="mw-page-title-main">Leasehold Reform Act 1967</span> United Kingdom legislation

The Leasehold Reform Act 1967 is an act of Parliament of the United Kingdom, which concerns English land law and compulsory purchase. A government bill, the law remains largely intact. It was passed by both Houses and had been tabled by ministers of the Labour government, 1964–1970.

<i>James v United Kingdom</i>

James v United Kingdom [1986] is an English land law case, concerning tenants' (lessees') statutory right to enfranchise a home from their freeholder and whether specifically that right, leasehold enfranchisement, infringes the freeholder's human rights in property without being in a valid public interest.

<span class="mw-page-title-main">Yianis Group</span> British real estate developer

Yianis Group is a London-based property development and investment company, wholly owned by the Cyprus-born British billionaire, John Christodoulou.

<span class="mw-page-title-main">Land Transaction Tax</span>

Land Transaction Tax (LTT) is a property tax in Wales. It replaced the Stamp Duty Land Tax from 1 April 2018. It became the first Welsh tax in almost 800 years.

Fleecehold refers to the inclusion of onerous terms in the deeds of a freehold property or the lease of a leasehold property in the United Kingdom. The practice of fleecehold is known to be increasing in the UK, according to the results of FOI requests to the Land Registry. At a minimum, tens of thousands of houses are affected, but it is unknown how quickly the number is increasing. There have been several proposals by elected officials and campaign groups to abolish or mitigate the practice, and it has been questioned in Parliament and the devolved assemblies.

References

  1. ↑ "Rentcharges". Housing: Home Ownership. Department for Communities and Local Government. Archived from the original on 19 September 2011. Retrieved 15 August 2011.
  2. 1 2 "Rentcharges Act 1977". legislation.gov.uk. Retrieved 31 October 2021.
  3. ↑ HMRC. "Income chargeable: rent-charges, ground annuals, feu duties". GOV.UK . PIM1056. Retrieved 26 February 2023.
  4. ↑ "Rentcharges - Detailed guidance - GOV.UK". gov.uk. Retrieved 18 January 2014.
  5. ↑ "Chief rent". Mortgage Glossary. Retrieved 21 September 2009.
  6. ↑ Gwynne, Andrew. "Beware of Chief Rent scams". Andrew Gwynne MP. Retrieved 30 June 2014.
  7. ↑ "Rentcharges". GOV.UK. 18 December 2019.
  8. ↑ HMRC. "Specific deductions: rent & rates: rentcharges". GOV.UK . BIM46830. Retrieved 26 February 2023.
  9. ↑ "Implementing reforms to the leasehold system in England" (PDF). October 2018.
This page is based on this Wikipedia article
Text is available under the CC BY-SA 4.0 license; additional terms may apply.
Images, videos and audio are available under their respective licenses.