Frank Albert Fetter, “Rent Charge”

Frank Albert Fetter’s encyclopedia entry “Rent Charge,” originally published in 1934, examines a legal instrument linking landed income to capital investment. The publication year of the supplied version is undocumented. Moving from legal definition to financial practice and religious judgment, Fetter shows how a transaction could serve the purposes of borrowing without receiving the same ecclesiastical treatment as an ordinary loan.

The term rent charge in the mediaeval law of the various European lands may be defined untechnically as the grant by a landowner of a rent to be paid out of the income from his lands.

The definition locates the instrument in the assignment of income from land. In English common law, the purchaser possessed a power of distress, while legal details distinguished rent charge from other forms of rent. From at least the twelfth century, its purchase and sale enabled northern European landowners to raise funds and burghers to invest money capital. Fetter thus connects a landed legal institution with the financial activity of commercial society.

In financial markets in the commercial towns fixed incomes in the form of rent charges were exchanged for capital sums involving a time discount rate and rate of yield quite as in a modern bond market.

The bond-market comparison makes capitalization and yield central to the explanation. Early returns of 8–10 percent subsequently fell to about 5 percent and sometimes lower. These changing yields place rent charges within a history of investment, rather than treating them solely as legal survivals.

Unlike an ordinary "loan of money" secured by a mortgage on a landed estate, the rent charge escaped the disapproval of the church as a device for investing capital to obtain a fixed income without labor.

Economic similarity therefore coexisted with a consequential difference in religious acceptance. Fetter closes by distinguishing legal survival from practical importance: rent charge remained an available contract but largely fell into disuse as financial markets developed more convenient investments sanctioned by church and state. The entry explains its historical role through the interaction of property law, investment demand, and religious constraints.