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Rentcharges and The Leasehold and Freehold Reform Act 2024

These small demands are now a less troublesome issue for property owners.

A “rentcharge” is an archaic concept. It is not a “rent” but a small sum payable by a freehold property owner to someone who usually no longer has interest the property. A “rentcharge” is different from an “estate rent charge” which is, on a basic level, a freehold service charge.

Under the Rentcharges Act 1977, the creation of most types of rentcharge has been prohibited. The main exception to this is an estate rent charge.

Until the Leasehold and Freehold Reform Act 2024 (the LFRA) came into force on 24 July 2024, the person entitled to receive the rentcharge had significant powers of redress where the rentcharge went unpaid.  Under s.121 of the Law of Property Act 1925, the rent charge owner could take possession of the premises until the arrears were paid, or to grant a lease to a trustee to recover outstanding sums.

These draconian powers meant that banks could refuse to lend on properties subject to a rentcharge and it was difficult to obtain indemnity insurance to cover the risk caused by the rentcharge.

Under the LFRA this should no longer happen.

The LFRA introduced a new definition of a "regulated rentcharge". Very generally, regulated rentcharges are all rentcharges save for estate rent charges, statutory rent charges and those made by a court order or relating to certain family trust arrangements.

The LRFA has removed, for regulated rentcharges only, the s.121 remedies of taking possession and/or granting a lease.

Regulated rentcharges can still be demanded. However, owners of rentcharges may not take action to recover rentcharge arrears until specified notice procedures have been properly compiled with. 

If you own or are buying a property subject to a rentcharge you should take specialist advice. If you collect rentcharges you will have to familiarise yourself with the new arrears collection process. 

Posted on 10/01/2024 by Ortolan

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