In modern housing estates, the use of estate rentcharges has been a popular trend over the last 2 decades. For example there may be, what are in effect service charges for an estate, maybe for maintenance and repair of playparks, communal lighting and landscaped areas which may not be particularly large but do require some method by which each individual owner is obliged to contribute towards them.
A rentcharge is an interest in land with property rights attached to it. The rentcharge owner could be the original developer or a management company set up to administer the estate. The difficulty is that Section 121 of the Law of Property Act 1925 grants a rentcharge owner remedy which may apply if charges are not met by the householder and these can include rights of entry and rights to grant Leases of the property to recover the arrears so non payment of even a small amount can cause major problems.
The case of Roberts v Lawton 2016 really demonstrates the problem. Property owners with modest arrears were penalised by the rentcharge owners granting its Directors as Trustees of leases of the property for a term of 99 years which effectively prevented their sales. Land owners were compelled to pay significant sums in return for the surrender of those Leases. One owner was asked to pay £650 and even when the rentcharge is paid, the Lease continues until surrendered.
The Land Registry having refused to register the Leases initially, the matter went to Court and the Tribunal Judge reluctantly found that the practice of registering the Leases was lawful despite being completely disproportionable and an “unfair” remedy.
Borrowers and clients generally should be careful to meet deadlines for payment given by a rentcharge owner and make sure that payments are not due which could lead to heavy handed enforcement action being taken.
If you have any queries on this matter contact Mark Ollier.