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Rentcharges (Notification)

Volume 498: debated on Wednesday 28 October 2009

Motion for leave to introduce a Bill (Standing Order No. 23)

I beg to move,

That leave be given to bring in a Bill to require rentcharge companies to notify annually residents subject to chief rent of their statutory right to redeem their charge under the Rentcharges Act 1977; and for connected purposes.

I am pleased to have been given this opportunity to bring to the attention of the House a specific problem affecting properties in my constituency and a small number of others, and to provide a practical and, for the Government, cost-free method of resolving a long-standing problem. In short, I wish the existing law to be amended to allow for a tightening up of the regulations regarding chief rent charges and to prevent some of the bad practices that rentcharge companies have used on my constituents in recent years.

I first raised the issue of rentcharges in my maiden speech, and since then I have been contacted by a large number of local residents who have been caught up in various chief rent scams and have quite frankly been conned out of money, often hundreds of pounds, by estate management companies. Greater Manchester is one of only a handful of areas in the country where chief rents were legally established. Chief rent is a perpetual charge, a form of ground rent that is charged on freehold properties by a previous landowner. It affects properties only in small parts of the country including parts of Greater Manchester such as Tameside and Stockport in my constituency.

As with any charge, the resident is billed by the property company each year to pay the chief rent. It is often a very small sum of a few pounds a year, and because the charge remains at the level at which it was originally set in the deeds, it is of diminishing value in real terms to the rentcharge companies as time goes by.

Under the provisions of the Rentcharges Act 1977, the freeholder can unburden themselves of any annual rentcharge created before 22 August 1977 by applying to make a lump sum payment through the relevant Government office. In the case of my constituents, that is the Government office for the north-west. The Act provides a formula that enables the Government office to calculate the redemption figure that the rent payer has to pay the rent owner in order to redeem their rentcharge. That figure comes out at roughly 14 times the annual chief rent.

When the transaction has been completed, the Government office, on behalf of the Secretary of State, issues a redemption certificate to the rent payer. That provision was secured by intensive campaigning in the 1970s by a number of MPs, including my predecessor but one Ken Marks, who was the Member for Manchester, Gorton, in the days when much of my constituency was in that one. He also successfully campaigned to ensure that no new chief rents could be created after 1977 and that any rentcharges still in existence by 2037 would be automatically extinguished. However, those laudable changes unfortunately created some new challenges, as I will briefly explain to the House.

For all the time that I have been an elected representative, first as a councillor on Tameside metropolitan borough council and since 2005 as an MP, I have been contacted by many local constituents who have been subject to various underhand tactics by unscrupulous management companies. In the past, I have launched campaigns to warn residents throughout Tameside and Stockport about various chief rent scams. In the most recent scam, letters were sent out by property companies to local residents, offering a “cut-price reduction” for home owners to buy out their chief rent. One area where they targeted householders was the Dane Bank area of Denton, where the chief rents were set in the 1930s, generally at around £2 to £5 a year, depending on the size of the landholding. Had residents been made aware of the 1977 Government scheme, the average cost of buying out the rent would have been between £30 and £60 in total. The property company’s offer was for people to pay around £350 but, in a twist, there was a “special offer” whereby that was reduced to £250 for a limited period. In essence, people were being fleeced for hundreds of pounds by those property companies.

There are other examples of such practices. Companies sent out property surveys to see what improvements residents had made to their homes. When people filled out the details, they were hit with excessive charges for making alterations without having the rentcharge company’s permission to do so, despite being freeholders. Such administration and penalty charges can also run into hundreds of pounds.

It appears that that tactic is being used only on properties on which it is not now economically viable to collect the charge annually, so the companies are looking for other methods for raising income from the rentcharge. For years, rentcharge companies have been trying it on with residents, attempting to fleece them for as much money as they can, especially as the value of the rentcharge is worth less and less as time goes by. Frankly, it is outrageous that the companies can charge people for occupying land that, as freeholders, they own outright anyway. It is nothing short of a throwback to feudal times.

Until the rentcharges are extinguished in 2037, I want to ensure that my constituents are made fully aware of their rights to buy the rent out using the existing Government scheme. I would hate for even more local people, particularly vulnerable groups, to pay over the odds. That is why I am presenting this Bill.

My concern is that some residents who are unaware of the provisions in the 1977 Act will think that the £250 offers and the like are a good deal. I want to make local residents in Denton and Reddish, and elsewhere, aware that they can purchase their chief rent for a lot less money by filling in an application form and sending it to their Government office. That can be achieved very simply and at no cost by legally obliging all property companies to automatically notify residents of their rights under the 1977 Act to buy out their chief rent, in plain English and in a prominent way, when they send out demands for the charge each year.

Back in 1977 when the Rentcharges Act was being debated, probably nobody anticipated how rentcharges would be abused. The small changes proposed in my Bill will ensure that people are correctly notified about their existing statutory right to purchase and buy out chief rents, and most importantly, give them the absolute confidence that they are doing so at the correct price.

Question put and agreed to.


That David Heyes, Ann Coffey, James Purnell, Sir Gerald Kaufman, Tony Lloyd, Graham Stringer, Mr. Graham Brady, Mark Hunter, Andrew Stunell, Mr. John Leech, Jim Dobbin and Andrew Gwynne present the Bill.

Andrew Gwynne accordingly presented the Bill.

Bill read the First time; to be read a Second time on Friday 30 October and to be printed (Bill 154).

On a point of order, Mr. Speaker. I came in very slightly too late to hear the gist of an earlier point of order made by the hon. Member for Meriden (Mrs. Spelman), but I gather that the document the Government have published today, which is referred to in our amendment, is not in the House of Commons Library and that it may not have been provided to the hon. Lady and other Opposition spokespersons. I deeply apologise for that. I personally attach great importance to the matter. I will endeavour to find out what went wrong, but for now, I give my apologies to you, Mr. Speaker, and to the House.

I am grateful to the right hon. Gentleman for his point of order and I know that what he has said will be appreciated by the House.