Historical rent charges: what you need to know

What is a Rent Charge?

Rent Charges are obligations included in Title Deeds to make payment of an annual sum to a third party who has no interest in the property.  Whilst the charge usually is for a minimal amount the effects on non-payment can be way more problematic than you would think.

Why the concerns?

If the Rent Charge has not been paid for a period of 40 days then the Rent Charge owner has a statutory right to relief regardless of whether the amount owed has been demanded. Under section 121 of the Law of Property Act 1925, the Rent Charge owner can take possession of the property to recover arrears. Another option for the charge owner is that they can grant a Lease of the property to Trustees to raise and pay the arrears and associated costs. If they do so, there is no provision in the Rent Charge Act 1977 for the lease to end once the arrears have been repaid and, therefore, leaving the owner of the property in the position where they cannot sell the property without persuading the rent charge owner to surrender the lease.

Due to their historical nature, it is often difficult to locate the party who is benefiting from the charge.

What about my mortgage lender?

Mortgage lenders have become increasingly wary of these historical charges. Most lenders are satisfied if the Estate Rent Charge provides that they be given 21-28 days’ notice of any arrears and any intention to take action. Some now require 2 months’ notice of any arrears to allow the opportunity to remedy the breach and they also require notice of any further action taken regarding non-payment.

What are my options?

1. Redeem the Rent Charge in full – this is done by completing a form with the Rent Charge Unit. They will then attempt to locate the beneficiary of the charge and then advise you of how much needs to be paid. This will lead to a certificate being granted which Land Registry can use to remove the Rent Charge from your deeds. If the owner of the Rent Charge cannot be located they will advise you of your options.
2. Indemnity Policy – this will protect your lender but not you from the effects of non-payment.
3. The charge will terminate on 22^nd July 2037 or 60 years from when it was first payable depending on whichever is later
4. Express release – the rent charge owner may look to sell the rent charge to you