The End of Rent charges- The latest development in Wales to end the archaic practice

A rent charge is an annual sum paid by the owner of freehold land to another person who has no other legal interest in the land. It is sometimes known as ‘ground rent’ but, despite the terminology, rent charges have no connection with leases or letting and they continue indefinitely. This practice has existed for many centuries and often occurred when one landowner gifted freehold land for development but then required an indefinite rent charge over it. However, since the Rent Charges Act 1977 (RA 1977) no new rent charges could be created (except for one or two exceptions).

The RA 1977 and the Rent Charges Regulations 1978 stopped rent charges firstly by extinguishing some automatically, and secondly by setting out a procedure whereby the remaining rent charges could be extinguished by the payment of a single lump sum (or ‘statutory redemption’ in legal speak). Unfortunately for many people wishing to end their rent charge, the lump sum was determined by the regulations via a formula, which is now unworkable. This is due to one element in the formula, “the gilt”, becoming defunct.

The Housing and Planning Act 2016 sought to remedy this problem by amending the RA 1977 to allow the Secretary of State to determine how the lump sum is worked out, thereby replacing the defunct formula. In England, this came in the form of the ‘The Rent charges (Redemption Price) (England) Regulations 2016’ which came into force on 1 October 2016. These regulations set out a revised formula for calculating the single lump sum required and have done so by replacing “the gilt” element of the formula with a new workable one based on the National Loans Fund’s published interest rates.

Following England’s example, ‘The Rent charges (Redemption Price) (Wales) Regulations 2017’ were recently concluded and come into force on 10 February 2017. These regulations adopt the same formula as prescribed by the English regulations and will hopefully ensure clarity and uniformity for people endeavouring to extinguish those burdensome rent charges.