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What is a Rentcharge?

Posted on 21st January 2020

In some cases, referred to as a ‘chief rent’, a rentcharge is a sum, usually paid annually, enforceable on freehold property owners to make payments to a third party whom have the benefit of a rentcharge. The rentcharge creates a legal interest in the land and should be registered at Land Registry against the title affected. Once registered, it is binding on all future owners of the land.

Whilst the payments involved are usually small, and in recent times being demanded less and less, if you are purchasing a property affected by a rent charge, your conveyancing solicitor should be making the necessary enquiries in this regard. If you proceed with the purchase, without the advice of your solicitor in Preston on the rentcharge, as the new property owner you could face great danger in this respect.

As the rentcharge is binding on the land and all future owners of the same, the owner of the rentcharge itself reserves a right to collect any amounts due, therefore, if the same has not been collected for some time, there is a risk of high sums being demanded.

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In such matters, MG Legal’s solicitors in Preston would be considering the following:

Has the rentcharge payment been demanded during the seller’s ownership? If so, we would require copies of six years receipts of payment for the same, to ensure no adverse recourse on you, as the new owner.

If, however, the rentcharge has not been demanded, our conveyancing solicitors would request that a retention be agreed. We would request that the retention would be held in the seller’s solicitor’s client account for a specified period, such as 12 months, in a sum equal to six years backpayment of the rentcharge. This would then cover in the event that you move into the property, and a demand for payment is made in respect of the previous years. As you would not have been in ownership in those previous years, there would be sufficient funds being held in the previous owner’s solicitor’s client account to make payment with.

In addition, we would request that an indemnity insurance policy be taken out, at the expense of the seller, to cover in the event that any costly claims for payment are demanded.

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The creation of any new rentcharges, under the Rentcharges Act 1977, is no longer legal. Although the same are slowly being discharged at the Land Registry, there are still many properties with rentcharge stipulations. This is something that MG Legal’s solicitors in Preston are alert to and would question when raising enquiries, prior to Exchange of Contracts.

If you are purchasing a property and have concerns as to rentcharges and their importance, or have any other conveyancing query, contact our expert team, at property@mglegal.co.uk, and our solicitors near you will be on hand to assist.