Freehold house and rent charge.

[angell84]

I am in the middle of buying a property. I am currently at the stage, where my solicitor is doig the searches.
She has just informed me that if I buy the house - I will have to pay a rent charge of 75 pounds per year. It is freehold. THTe rent charge was established way back in the 1800's. Merseyside

Has this happened to anyone.
Would you buy a house like that?

Firstly whoever benefits from the rent charge cannot demand more than 7 years in arrears (this is the principle of estoppel). Usually you’d ask for an allowance (an amount from the purchase price) for the sum of 7 years rent charge, so in effect, if you do have to pay the seller has covered this. But given it’s quite a lot here the seller might not agree.

If it’s not been collected, realistically what’s the concern?

Re indemnity, your mortgage lender requires a clear title. Where there are imperfections they require indemnity.

You’ve paid your solicitor to review the title to the property, they have and they’ve advised you on it. Why would they review it, spend all that time then charge you. Effectively meaning they don’t get paid if you don’t like what you read?

Talk to your solicitor, not Mumsnet.

We have a £6 chief rent, previous owners said they hadn't paid it or it been asked for: however our solicitors got our sellers to pay the indemnity for 6 years. I think that's all they can claim for whenever owns the charge anyway.

We had this when buying our house 3 years ago. Rent charge but nobody knew who it should be paid to so hadn't been paid for years. We got indemnity insurance to cover ourselves but pretty sure that was only a one off payment about £40 or so.

@FunOnTheBeach20, my lawyer said - if previous rent has not been collected , that the rent charge owners could potentially take the house back after I buy it. That is the concern!

I am not getting a mortgage.

What do you mean 'talk to your solicitor, not mumsnet. ' I have asked her, she usually takes a week to reply, and I am worried and want to hear other's experiences.

Thanks for the info @ChasingRainbows19,

Just to clarify - I am a cash buyer, I am not getting a mortgage.

I think that I will try to get the seller to pay back rent and produce a receipt. Or pay the indemnity insurance.

Thanks for the help everyone

What do you mean 'talk to your solicitor, not mumsnet. ' I have asked her, she usually takes a week to reply, and I am worried and want to hear other's experiences.

I mean talk to someone with the necessary expertise to advise you and not Mumsnet who mostly don’t have a clue!

If it’s from the 1800’s and not been collected how are they going to pay it and get a receipt? Nobody is collecting it because they’re now dead.

The owner of a rentcharge which has been unpaid for more than 40 days can take action which includes forfeiting the owner's title - even if the rentcharge hasn't been demanded.

I'm still concerned that at £75 a year this isn't a chief rent rentcharge but is something else.

Yes it is really strange .

It says that if a rent charge has not been paid previously, then the rent charge owner can take ownership back of the house, even after I buy it.

Isn't that a bizarre system.

All she has found out so far, is that the seller cannot provide a receipt that it has been paid. I have to chase him up more on what has been happening.

House buying is a load of fun isn't it!

I will let you know what she says when she replies, it might be useful to other people aswell.

I know it's a major PITA but I think I'd consider the indemnity insurance, in case they were able to come after you for years of unpaid rent.

I say this because although slightly different, we bought a leasehold flat with a supposedly absentee freeholder. In fact he wasn't absent, just hiding a few miles away under another name, because of debts attached to the FH. Previous owner of the flat had been unable to contact him and no ground rent had been asked for or paid for several years.

But he popped up during the process of our buying the FH - once he'd realised there would be money in it! - and although he'd been 'absent' and not demanded ground rent for years, we were still legally obliged to pay him several years of back GR before the FH purchase was finalised - it came to several hundred £££.

Having said all that I agree 100% that these historical schemes for extorting money - esp. in a FH property! - are ludicrous and should have been abolished long ago.

When I worked in conveyancing (legal secretary), we didn't make anything out of the indemnities and we always asked the sellers to pay first. I would ask if they can ask the sellers to either provide proof it's paid up to date or pay for the insurance

I heard a piece on Moneybox (R4) the other week about charges on FH new builds. Apparently since selling LH properties has been demonised developers are getting around not being able to charge ground rent by loading the properties with all sorts of covenants which don't have sums attached and people are being sent bills for hundreds of pounds.

I've not heard of these older covenants on Victorian developments. Who is the rent actually paid to? Presumably the original developer is long gone?

Because its usually an estate management company that takes the money - not an individual.
Ours was built in the 1960's, the law is from the 1800's and can apply to houses built up to the 1970's.

We have this as well (also between Liverpool and Manchester), but it's under £10 a year and wasn't collected. Our seller had to leave 7x the amount with the solicitor as this is the maximum they can ask for.
I had a hit if a Google search to find out who belongs to in our case but wasn't very successful.

@Rustyigloo

Whether or not it’s an individual or an management company varies. A management company collects a service charge, rather than a rent charge which doesn’t necessarily have the cost of providing services attached.

If it’s a company you can check companies house to see if they are still trading.

@FunOnTheBeach20
Not necessarily. Ours is collected by an estate management company and is definitively a chief rent.
We are a freehold house and dont pay for any services.

Very common for the North West OP. I'm in Manchester and when I bought my house it had an annual rent (about £4 I think, actually payable to the house next door but one as the 'head' house but I used to give them a bottle of wine). Yes, I worried about it before buying too. No, it was never a problem and after a few years I arranged to buy the freehold (£600 I think but can't quite remember).

But a definite yes to indemnity insurance in your situation!

Redeeming a rentcharge is not the same as buying the freehold. Houses with a rent charge are usually freehold. It's not to be confused with a ground rent as it's not the same.

I've paid rentcharge to an estate agent that did the collections for the rentcharge owner and also to larger property management organisations. It depends how the rentcharge owner deals with it. It isn't a service charge!