Rentcharge meaning

This checklist is intended for use in a due diligence process where a purchaser, tenant or lender is examining title to property that is burdened by, or enjoys the benefit of, positive covenants. It sets out the relevant matters to consider when reviewing and reporting on positive covenants. Are there any positive covenants affecting the property? A positive covenant is a commitment to perform an act or to make a financial contribution to something. Typical examples in property transactions include covenants to erect and keep in repair a fence, or to contribute towards the upkeep of a shared driveway or other communal facilities. HM Land Registry has no duty or authority to record the benefit of a positive covenant on a registered title...

What is a positive covenant? A covenant operates as a contractual promise. Common examples of positive covenants found in land transfers impose duties to: carry out repairs or upkeep (for example, access ways), or contribute towards repair and maintenance expenses incurred by another put up buildings or boundary fencing (for example, on a transfer of part) pay additional sums (i.e. overage) where, for instance, planning permission is obtained, or on a sale following development of the land What is the issue with positive covenants? At common law, it is firmly settled that the burden of a positive covenant affecting freehold land does not pass with the estate. Accordingly, if one party to a freehold transfer (Party B) gives a positive covenant in favour of the other (Party A), that obligation will not bind Party B's successors in title, despite section 79 of the Law of Property Act 1925...

A covenant operates as a type of contract. Under the doctrine of privity, contractual rights and obligations attach only to the contracting parties, excluding third persons. Yet, with land-related covenants, property law can permit enforcement by, and sometimes against, individuals beyond the original parties. The applicable principles are: in the majority of instances, the benefit of both restrictive and positive covenants passes to successors in title, as it ‘runs with the land’ at common law and in equity subject to specific conditions, the burden of a restrictive covenant runs with the land in equity alone (and so can be enforced against successors in title), whereas the burden of a positive covenant does not run with the land (but see Statutory exceptions below) This inability of positive covenant burdens to run with the land is widely viewed as a significant shortcoming in English property law. One cannot compel successors in title to comply with even simple positive duties (for example, maintaining a boundary...

When disposing of a freehold on sale, sellers may seek to impose positive covenants for later owners to fulfil. Difficulties can occur when trying to enforce positive covenants against successors in practice and in law. While leasehold covenants bind the initial tenant and anyone taking title after them, positive covenants in freehold conveyances do not by default. One technique to safeguard and enforce covenants over freehold land is the use of an estate rentcharge. For alternative approaches see Practice Note: Positive covenants—binding successors in title. Since August 1977, only specified categories of rentcharge, including estate rentcharges, can be created. Estate rentcharges can be used to enforce: positive covenants service charge contributions towards the rentcharge owner’s costs in performing covenants for the: provision of services undertaking of maintenance or repairs arranging of insurance, or making any payment for the benefit of the land subject to the rentcharge or for the benefit of that and other land ...

The Land Registration Act 2002 (LRA 2002), succeeding the Land Registration Act 1925, empowers HM Land Registry to continue maintaining the register of title to land in England and Wales. For each title, the register comprises a property register and a proprietorship register and, where needed, a charges register. Historically, HM Land Registry provided a paper land certificate (or, where the property was charged, a charge certificate) to the registered proprietor as proof of ownership; these were rendered obsolete when the LRA 2002 commenced. Ownership is now demonstrated by official copies of the register. See Practice Note: How to obtain official copies of the register from HM Land Registry. This Practice Note considers the separate registers of title, the effect and conclusiveness of registration, and the owner’s powers under the LRA 2002. Property register Contents of the property register Except where otherwise permitted, the property register of any registered estate must contain: a description of the registered estate which, for a registered estate in...

The general rule The general rule is that when a buyer of a freehold interest enters into covenants with the seller, although the burden of restrictive obligations will in many instances bind a successor in title, positive duties requiring the covenantor to act do not run when the freehold is conveyed. A rentcharge operates as a device by which a monetary duty can pass to the successor of the initial buyer. There is no issue, as a matter of contractual privity, in imposing on the purchaser a contractual obligation to pay the seller for the supply of services relating to the land; however, matters become more intricate once the seller transfers the freehold estate to a third party. The rentcharge nonetheless entitles its holder to demand regular periodic payments of money from the owner of the freehold estate. It is not a mortgage, because it does not function as security for a debt...

A rentcharge is an amount due from a landowner to a third party lacking any proprietary stake or right in that land, and so it clearly differs from ground rent, which a leaseholder pays to the freeholder. Developers frequently used rentcharges to facilitate development and building on land without paying the landowner a premium for it, with the owner receiving an ongoing income from the land instead. The Rentcharges Act 1977 (RcA 1977) banned the creation of any new rentcharges, save for narrow exceptions, and mandated that most existing rentcharges would end by the year 2037 (RcA 1977, s 3). An estate rentcharge remains one such preserved exception...

An initial consideration at the outset is to ask why B wants a legal charge. Is it intended to ensure the works are completed? To enable B to do the works in default? Or is it about finance, ie does B seek security so that, if A fails to do the work, B will obtain monies (eg by selling A’s land) to cover the cost of the works required accordingly?...