What rentcharges are, how to apply to pay only your share of ('apportion') a rentcharge, or apply to buy out ('redeem') your rentchange.
What is a rentcharge?
A rentcharge is an annual sum paid by the owner of freehold land to another person who has no other legal interest in the land. The person who receives payment from the rentcharge is known as the ‘rentowner’.
Rentcharges have existed for many centuries, but since the Rentcharges Act 1977 no new rentcharges can be created.
Rentcharges provided a regular income for owners of land who were prepared to release land for development. Sometimes the land was released without a capital sum being paid with the rentcharge being the only payment.
A rentcharge is sometimes called a ‘ground rent’. However, a true ground rent is charged on leasehold land. Rentcharges are also often known as ‘chief rents’ in the north west of England.
Who has to pay the rentcharge?
Once it’s imposed, a rentcharge continues to bind all the land even if it’s later divided and sold off in plots.
The rentowner could make any one of the householders on the land pay all of the rentcharge and collect the appropriate portions from the other householders on the land.
This has led to many unfair situations. In some cases, the householder wasn’t able to get money from the others and was left out of pocket.
Sometimes, a rentowner would agree to collect the various portions separately from each householder. This is known as an ‘apportionment’. It could be legal or informal. Most apportionments were informal.
You can apply to buy out (‘redeem’) your rentcharge so that you no longer have to pay it (see ‘How to redeem your rentcharge’ below). If your house is one of a number of houses charged under one rentcharge, you would first need to get your share apportioned legally (see ‘How to legally apportion your rentcharge’ below).
How to redeem your rentcharge
Certain types of rentcharge are redeemable under the Rentcharges Act 1977. This means that you pay a single lump sum and after that no longer have to pay the rentcharge.
Normally the rentcharges team uses the formula in section 10 of the Rentcharges Act 1977 to work out the redemption figure to enable you as the rent payer to redeem your Rentcharge. However, the formula cannot currently be used because part of it, the gilt (or 2.5% consolidated stock which is represented by the letter ‘Y’ in the formula), has now itself been redeemed and is no longer listed. This means we are no longer able to calculate a redemption figure for applications that we receive.
On 21 October 2015 we published a technical discussion paper seeking comments on 3 issues:
- a replacement rate or instrument for the 2½% Consolidated Stock, to be used in the calculation formula for rentcharge redemptions
- calculating minor superior leasehold interests for enfranchisement and minor intermediate leasehold interests for lease renewals and enfranchisement
- the future role of the Secretary of State in the process of redeeming rentcharges
The closing date for all responses is 4 November 2015.
As the process of updating the formula may take some time to complete you may wish to approach the rent owner about redeeming your rentcharge directly. This would be a private arrangement and we would not be involved in the process. The formula is not needed to calculate the redemption figure where you choose to negotiate this with the rent owner.
If you decide to apply to redeem your rentcharge under the Rentcharges Act 1977:
- Download the application form below, fill it in and sign it. Return the form to: Rentcharges Unit, Department for Communities and Local Government, Ground Floor, Rosebrae Court, Woodside Ferry Approach, Birkenhead, Merseyside, CH41 6DU.
- When you send the form, include a copy of the deed that created the rentcharge and a copy of the Land Registry register (if the property is registered). See an example of a Land Registry register.
- The rentcharges team will contact the person you name as the rentowner and ask them to confirm ownership.
- Once they have confirmed, the rentcharges team will tell you how much money you have to pay the rentowner to redeem the rentcharge. If the rentowner doesn’t confirm ownership, the rentcharges team will advise you what to do.
- You send payment to the rentowner. Ask for the receipted form to be sent back to you.
- Once you get the form back, send it to the rentcharges team.
- They will then send you a certificate of redemption.
You can also redeem your rentcharge without applying to the DCLG rentcharges team, as long as the rentowner agrees and you both agree on the payment.
How to legally apportion your rentcharge
You can apply for an ‘order of apportionment’ which legally separates your share of the rentcharge.
To apply to apportion your rentcharge:
- Download the application form below, fill it in and sign it. If there are joint owners, all of you should sign. Return the form to: Rentcharges Unit, Department for Communities and Local Government, Ground Floor, Rosebrae Court, Woodside Ferry Approach, Birkenhead, Merseyside, CH41 6DU.
- When you send the form to the DCLG rentcharges team, include a copy of the deed that created the rentcharge and a copy of the Land Registry register (if the property is registered). See an example of a Land Registry register.
- The rentcharges team will contact the person you name as the rentowner and tell them that you have applied.
- The rentcharges team will then issue a draft order of apportionment. This will include the amount of rentcharge you are paying.
- If the rentowner objects, the rentcharges team will consider this and adjust the amount if necessary. If they do this, they’ll send you a copy of the amended draft order.
- If the rentcharge apportioned to your house is £5 or less per year, the rentowner can ask that you instead have to buy out your share (‘redeem’) your rentcharge by paying them a lump sum. The rentcharges team won’t allow this if it would cause you financial hardship.
- If the rentowner does not object or you don’t withdraw your application after the draft order is amended, the rentcharges team will send you an order of apportionment. They will also send a copy to the rentowner and all the other householders who pay the rentcharge.
Apportioning ground rents on leasehold houses
If you pay a ground rent on a leasehold house that is also payable on other neighbouring properties, you can apply for an ‘order of apportionment’ that legally separates your share of the ground rent.
The process for applying is the same as for apportioning a rentcharge (above), but you should use this application form:
Individual ground rents on leasehold houses cannot be redeemed by payment of a lump sum in the same way as rentcharges.
How much does it cost?
Most rentcharges have fewer than 60 years to run, and in such cases the cost of redemption is, at present, about 16 times the annual amount of the rentcharge.
You don’t have to pay any fee to the DCLG rentcharges team for apportionment or redemption of a rentcharge. However, you may have to pay other costs, like getting a copy of your house deeds.
If you intend to visit the office for any reason please either telephone or email to make an appointment beforehand to avoid disappointment.
Department for Communities and Local Government
Ground Floor, Rosebrae Court
Woodside Ferry Approach
If you have any questions about the process to apportion or redeem your rentcharge, email the DCLG rentcharges team at email@example.com or call 0303 444 4558 or 0303 444 8095 or 0303 444 4560.