Sam James, Trainee Solicitor
As discussed in the previous article, Rentcharges, a rentcharge is an annual or other periodic sum charged on land which may pass with a property. They increase liability on a homeowner as a failure to pay the amount stated can allow the beneficiary to take remedial action, such as evicting a homeowner! It is because of this rentcharges are deemed to be arbitrary and archaic.
An estate rentcharge is a type of rentcharge created as a method of enforcing homeowners to contribute towards the cost of maintaining the common space at a residential development. Estate rentcharges came into effect as a method for developers to recoup any costs incurred for the maintenance of common spaces on residential estates; such as shared gardens and parks. Ideally, the local authority should take ownership of the common space once the construction of the estate has been completed. The local authority would then become responsible for maintaining the estate roads, flora, street lighting and any street furniture. In the event that the local authority rejects the adoption of responsibilities for maintenance of the common space, the common space may fall into a state of poor condition and repair. The estate will then be less appealing and may hinder the marketability of the unsold properties.
If a property is charged with an estate rentcharge and that amount falls due but is not paid, the beneficiary of the estate rentcharge may take possession of the property. Therefore, it is important that any estate rentcharges are identified before purchasing a property due to the additional cost and risk which may be thrusted upon a homeowner.
An estate rentcharge is comparatively similar to a service charge, which are often seen on leasehold properties. A key distinction, however, is that estate rentcharges are not capped by statute to a ‘reasonable’ amount. However, it is common for the amount to be nominal.
The repercussions of a failure to pay an estate rentcharge when it falls due can be severe, as noted in the previous article, Rentcharges. Careful consideration should be used when purchasing a property.
Things to note:
- An estate rentcharge will often be registered against the property and therefore it should be on the title documents. A prudent conveyancer will ensure that an estate rentcharge has been identified and the risk has been outlined to the prospective purchaser.
- Due to the associated risk on a prospective purchaser, the risk should also be brought to the attention of a lender (if the homebuyer is getting a mortgage). This is because there is a risk the proprietor may be evicted from the property and the lender’s security of the property being compromised.
- There is no procedure to challenge the sums requested, except through court. The homeowner should bear in mind that the cost of going to court is sometimes greater than the cost of the debt being pursued.
If you would like to ask any questions about rentcharges, please feel free to call to speak to our Commercial Property team who will happily answer any of your queries.