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Is a rent charge a rent?

These are relics from the past but investors and developers may come across rent charges affecting their properties. What do you do if you have a rent charge that appears on the Title?

The first thing to realise is a rent charge is nothing to do with a Lease or Tenancy but is in fact a charge registered against a freehold Title and is a regular sum of money charged on land.  It is a confusing terminology used to mean both a sum of money itself and an interest in land which entitles the owners of the rent charge to enforce a payment.  These are often quite small sums of money since they were often placed on property during the Victorian era and there is no provision for increasing the actual figure.  Sometimes rent charges are now just shillings!

In a commercial property context investors and developers are most likely to come across rent charges protecting payments for services on large estates.  These are now called Estate Rent Charges and can be an effective way of managing an estate both residential and commercial.  If your land is subject to a rent charge you need to make sure the rent is paid on time otherwise you could be pursued for the debt or subject to re-entry.  There are other provisions for example the grant of a Lease to Trustees who will try and use the Lease to raise enough money to settle the debt.

You will also need to make sure that if there is a separate Deed of Covenant along with the rent charge any purchasers of your land enter into a similar Deed of Covenant with the rent owner.  Not doing so might mean that you will still be bound by the covenant and have to pay even if you have sold your interest in the land.

Since the Rent Charges Act of 1977 (there are some exceptions) no new rent charges can be created after 22nd August 1977 and certain types of older rent charges already existing at that date will automatically be extinguished in July 2037.  However, the creation of new Estate Rent Charges is one of the exceptions permitted under the Act and so they may continue to be encountered in this form of property interest in the future and can be created for the management of an estate both private and commercial.

Douglas Godwin is a real estate Solicitor dealing with commercial property both for investment acquisitions and disposal, assisting landlords and tenants in leasehold transactions and is involved in commercial development work.  If you wish to discuss any property matter with Douglas please contact him on 01386 761176.

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