Rent charge

A rentcharge is an annual sum paid by the owner of freehold land to a person who has no other legal interest in the land. They are often known as "chief rents" in the north west of England but the term "groundrent" is used in many parts of the country to refer to either a rentcharge or a rent payable on leasehold land. This is confusing as a true groundrent is a sum payable in relation to land held under a lease. As a result, it is important to know the status of the land for which, an annual sum is paid.

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History

Rentcharges have been in existence since the Statute of Quia Emptores in 1290. The statute was passed by Edward I of England and prevented tenants from leasing their lands to others through subinfeudation. Before Quia Emptores, tenants were able to lease their title to land such that the land-owning lords did not have any power over the sub-tenant to collect taxes. In its place, a system of substitution was used where the tenant's full interest would be transferred to the purchaser or donee.

Function

Rentcharges provided a regular income for owners of land who were prepared to release land for development. 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 householder can be made responsible for paying the whole rent. That person is then left to collect the appropriate portion from the other householders whose land is subject to the rentcharge.

Reform

The Rentcharges Act 1977 [1]seeks to abolish most forms of rentcharge. Section 2 of The Act prohibits the creation of new rentcharges (except for a very limited form, for example to pay for upkeep of boundary fences). Any existing rentcharges will be extinguished on 22 August 2037. Rentcharges may also be redeemed by the freeholder ("bought out"), generally for around 16 times the annual amount of the rentcharge in accordance with provisions in The Act[2].

Ground rent is a similar concept but is applicable to leasehold property, not freehold.

References