What can a rentcharge owner do if the rentcharge is not paid?

What happens if a rentcharge goes unpaid?

More than the sum involved could possibly justify. Once arrears have run for a short statutory period — whether or not anyone ever asked you for the money — the rentcharge owner acquires remedies that include taking the income from the property and granting a lease over it. A few pounds unpaid can put a lease on your freehold, and a freehold with that lease on it is worth very little.

From the e-ROT archive

This scenario is drawn from Report on Title material dealing with this specific circumstance.

Lexsure master Report on Title paragraph: Historic Rentcharge - you must pay if demanded · See the wording

The remedies, and why they are so strong

Three things become available once arrears have persisted for the statutory period. The owner can sue for the money, which is the ordinary and least alarming route. They can enter into possession of the property and take its income until they are paid. And they can grant a lease over the property to a trustee, who can raise the money owed by mortgaging or letting it.

These remedies date from a time when a rentcharge was a meaningful income stream, and they were written to protect it. Applied to a debt of a few pounds, they are wildly out of proportion — and nothing in the statute scales them to the sum involved.

The two details that make it dangerous

<b>No demand is required.</b> The clock on arrears can run whether or not anyone has asked you to pay. Not knowing about a rentcharge is not a defence to the consequences of not paying it.

<b>Paying up may not end it.</b> Where a lease has been granted, paying the arrears does not automatically bring the lease to an end. It has to be surrendered, and the costs of getting to that point — administration charges, registration, legal fees — are not required to be reasonable and routinely dwarf the original debt.

That combination is why this is the one freehold obligation where a sum you could find in a coat pocket is treated as a serious title issue.

What to do about it on a purchase

Establish whether the rentcharge is being collected, and whether it ever has been. A collected rentcharge with a known owner is an administrative matter: pay it, keep the receipts, consider buying it out.

Where it is not collected and the owner is unknown or unresponsive, the standard protection is an indemnity policy — and the condition is the familiar one: no prior contact with the rentcharge owner. Do not write to them to be helpful.

Ask who is paying for the policy. Sellers sometimes decline on the basis that the rentcharge is ancient and has never been demanded, which is a reason to think the risk is low and not a reason to leave it uninsured. The premium on this kind of cover is small.

Historic Rentcharge - you must pay if demanded

Master precedent Lexsure e-ROTScope Right of re-entryWord count 43Status Current master paragraph

If the rentcharge falls into arrears in whole or in part, even for just a few pounds, they can exercise their right of re-entry and at their sole discretion do things as may become necessary to make good any default as mentioned above. …

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