RentCharges and the Leasehold and Freehold Reform Act 2024

The Leasehold and Freehold Reform Act 2024 (LFRA) is here, and it’s bringing some big changes to how rentcharges are handled. If you own a property, especially one subject to a rentcharge, you will want to know how these updates might benefit you.

On 24 July 2024, crucial parts of the Act came into effect, focusing on introducing fairer rules for certain types of rentcharges. But what are rentcharges, and why does this matter to you? Let's break it down.

What Are Rentcharges and Why Do They Exist?

A rentcharge is a payment attached to freehold property. This means if you own a property with a rentcharge, you pay a small sum—often a historic amount set years ago—to someone (like an individual or company) who benefits from it.

Most rentcharges are old, stretching back decades. New ones were largely banned after 22 August 1977, thanks to the Rentcharges Act 1977. That same law also decided that most existing rentcharges would end by July 2037. However, a few exceptions, like “estate rentcharges,” were allowed to continue—even after that date.

Why Are Rentcharges a Problem?

The issue lies in what happens if you miss a rentcharge payment. Previously, the person owed the money had some extreme powers under the law. They could, for example, take over the property, appoint someone to manage it, or even create a lease to recover the money owed. This could happen even if the missed payment was tiny, and no formal demand for payment was made.

These measures were seen as harsh and outdated (imagine losing your home over a minor missed charge!). A legal case in 2016 (Roberts v Lawton) highlighted just how unfair things could be.

This is where the LFRA comes in—to make the system more reasonable and protect property owners from heavy-handed enforcement practices.

What Changes with the New Rules?

The LFRA introduces a new type of rentcharge called a "regulated rentcharge." This change is great news for many property owners because it puts clear limits on what can happen if payments fall behind. Here’s what the law now does for regulated rentcharges:

• Fair Warning: Anyone owed a regulated rentcharge must follow a proper notice process before taking any steps to recover money owed. This means no sudden surprises.
• No More Extreme Measures: Powers like taking possession of a property or granting leases to recover debts are abolished for regulated rentcharges. These changes even apply to debts going back as far as November 2023.
• Control on Extra Fees: Administration charges for chasing unpaid regulated rentcharges can now be capped by the government.
• Stopping Further Charges: It’s no longer possible to create new charges based on regulated rentcharges.

If your property falls under the regulated rentcharge category, these updates should give you peace of mind and more protection.

What About Estate Rentcharges?

Now, not all rentcharges are covered by these changes. If your property is subject to an estate rentcharge, these rules don’t apply. Estate rentcharges are common in newer developments and often cover costs for maintaining shared spaces like private roads, gardens, or playgrounds.

Unfortunately, these types of charges are still in a bit of a grey area. The government has promised to explore this in the future. Until then, owners with estate rentcharges will need to wait for further developments.

How Does This Help Property Owners?

The LFRA is a positive step for property owners dealing with certain rentcharges. By removing the harshest penalties and introducing clear processes, the law makes owning property a little less stressful. You’ll no longer have to worry about losing your home or facing extreme measures because of a late or missed payment with a regulated rentcharge.

While those with estate rentcharges are not yet seeing these benefits, the government’s commitment to reviewing the issue gives hope. Change might be on the horizon for estate rentcharges too.

What’s Next?

For now, if you have a regulated rentcharge, you can rest a bit easier knowing the system is fairer. If you have an estate rentcharge, keep an eye out for updates from the government’s consultation—it’s a chance to improve how these charges are handled.

The Leasehold and Freehold Reform Act 2024 signals a move toward more balanced and consumer-focused property laws, offering reassurance to many property owners while laying the groundwork for future reforms.