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A rentcharge is an annual sum paid by the owner of freehold land to the owner of the rentcharge a person who need have no other legal interest in the land. They are often known as "chief rents" in the north west of England but the term "groundrent" is used in many parts of the country to refer to either a rentcharge or a rent payable on leasehold land. This is confusing as a true groundrent is a sum payable in relation to land held under a lease. As a result, it is important to know the status of the land for which, an annual sum is paid.
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. Once imposed, a rentcharge continues to bind all the land even when the land is later divided and sold off in plots. In such cases one householder can be made responsible for paying the whole rent. That person is then left to collect the appropriate portion from the other householders whose land is subject to the rentcharge.
The Rentcharges Act 1977 seeks to abolish most forms of rentcharge. Section 2 of prohibited the creation of new rentcharges except for 'estate rentcharges' (see below). Any existing rentcharges other than estate rentcharges will be extinguished on 22 August 2037. Such rentcharges may also be redeemed by the freeholder ("bought out"), generally for around 16 times the annual amount of the rentcharge in accordance with provisions in The Act.
The act retained "estate rentcharges". These are rentcharges that serve one of two purposes. Either the rentcharge is used as a device to impose a duty on the freeholder to perform a covenant or it is used to pay for services performed by the rentcharge owner for the provision of services, maintenance etc for the benefit of the land burdened by the rentcharge. Rentcharges will therefore continue to exist as a means of paying for the upkeep of freehold estates.
Ground rent is a similar concept but is applicable to leasehold property, not freehold.
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