One of the first actions for the new government should be to bring into force the Leasehold and Freehold Reform Act 2024, which received Royal Assent in the dying days of the last conservative government. In this article, we look at Part 7 of the 2024 Act, which introduces new protections for freeholders, whose titles are expressed to be subject to historic rentcharges. Here, we are not talking about estate rentcharges, which are a legitimate means of ensuring that everyone pays their fair share towards estate maintenance. We are talking instead about the old fashioned rentcharge, probably created more than hundred years ago, where tiny sums of money are charged out of property and payable to the owner of the rentcharge.
Until the Upper Tribunal decision in Roberts v Lawton [2016] UKUT 395, lawyers never gave much thought to this type of rentcharge. Who cares that the landowner is liable to pay another party a couple of quid a year, even if they knew to whom the money is to be paid? But in the Roberts v Lawton case, the Upper Tribunal held that failure, even to pay those few pounds, could result in the rentcharge owner exercising their rights under Section 121 of the Law of Property Act 1925, to walk in and take possession of the property or – more likely – grant a lease out of the property to its own nominee, which was what happened in the 2016 case. The effect of creating that lease was to freeze the title to the property, making it un-saleable and unmortgageable, which meant the property-owner could be held to ransom. Because that’s what the 1925 Act said that the rentcharge owner could do.  And that is currently still the case until the new legislation is brought into force.
The creation of new rentcharges of this type was abolished more than half a century ago by the Rentcharges Act 1977. But there are many thousands of rentcharges of this type still in existence, giving rentcharge owners the powers of enforcement set out in the Law of Property Act 1925. Furthermore, there is nothing to prevent ownership of rentcharges of this type, commonly known as ‘chief rents,’ being traded, just like stocks and shares.
Once it is brought into force, Section 113 of the Leasehold and Freehold Reform Act 2024, will introduce a new section 120B into the Law of Property Act 1925, which will prevent rentcharge owners from exercising any of their rights of recovery until they have first given the property owner a 30 day ‘wake up’ call, by serving formal notice demanding the outstanding rentcharge arrears and providing the following additional information:
- The name and address of the rent owner as well as a calculation of the arrears and details of how to make payment;
- Enclosing a copy of the instrument creating the rentcharge and proof of the rent owner’s title to that payment.
Even property-owners who receive such a notice but are dilatory in their response may still be protected by the new section 121(1A) of the 1925 Act, which will prevent rentcharge owners from going into possession of or granting themselves leases from the owner’s property in relation to any arrears covering a period after 27 November, 2023 (although the old remedies will still be available for pre-existing arrears recovery). It means, effectively, that, as regards arrears accruing after 27 November, 2023, rentcharge owners will be limited to what they can recover through the small claims court as a simple monetary debt, which is how it should be.
BRUCE AND HOLLY 