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tdlawyer
tdlawyer, Lawyer
Category: Property Law
Satisfied Customers: 1096
Experience:  Lawyer with 9 years experience of advising on property issues.
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I wish to lend my friend some money. We have agreed that I

Customer Question

I wish to lend my friend some money. We have agreed that I can have a (2nd) legal charge against his property. There is no issue about whether there is sufficient equity in the property - there is. I want to get everything sorted and registered at the land registry before I release the funds.
I have heard that you have to get the consent of existing charge holders.
I cannot find a clearcut answer on the net so far!
There are 3 chargees listed at the moment:
1. Lloyds bank with legal charge + restriction, - the usual 1st legal chargee
2. City council with interim charging order - small council tax debt
3. A.N.Other with unilateral notice + interim charging order. The interim charging order has recently been removed by the court but at present the unilateral notice remains on the register.
My hunch is that I only need consent from a chargee with a restriction. I hope this is the case as the less admin the better. Can anyone shed any light on this?
Submitted: 3 years ago.
Category: Property Law
Expert:  tdlawyer replied 3 years ago.

tdlawyer :

Hi thanks for your question. My name isXXXXX can answer this for you.

tdlawyer :

The consent is needed by the borrower from his legal charge holder (i.e. the first one). This is needed as in his mortgage deed, it will say that consent is required from them to further charge the property. Therefore to avoid being in breach of the terms of his mortgage deed, he would need consent.

tdlawyer :

Consent would not be required from the other two, as they put their charges on without the consent it would seem of the property owner.

tdlawyer :

Your charge would rank behind the existing charges, so they would all need to get paid first, before you got any money under your charge. Also, some charges provide that further funds can be borrowed at a later stage, and you need to be aware of this, as potentially, if further borrowing were taken with the existing first charge lender, then you might see the equity being stripped before your charge takes effect to be repaid. This might be more an academic concern that a real one, but I thought I should mention it.

Customer:

Is it anything to do with restrictions appearing on the land registry record?

tdlawyer :

Retsirctions and unilater notices are put there by people claiming to own the land or have some other interest in it.

tdlawyer :

It's a different thing.

tdlawyer :

Consent is needed from anybody with a legal charge that has registered that charge.

tdlawyer :

By the borrower, that is. You, as lender, would theoretically only need consent if they had a restriction preventing further charges without consent.

Customer:

Ok. Sorry to labour the point but +ve,sure, 100%!!!!!!!!

tdlawyer :

Hang on 2 mins ...

tdlawyer :

I'm just trying to file the relevant legal authority for you ... to comfort you.

Customer:

Much appreciated.

tdlawyer :

Okay, the closest I can find from the resources I have available at the moment is the right of lenders to alter the ranking of security between them without the borrower's consent, which is not the point you're looking for. In short though, unless there is anything on the register that prevents you charging (as lender) then you can charge with consent. The issue for the borrower is that by doing this, they might be in breach of their earlier mortgage and therefore find that being called in and the property sold.

tdlawyer :

Ah ... hold on.

Customer:

Thanks for your help. I'll now rate you as excellent.

tdlawyer and other Property Law Specialists are ready to help you
Expert:  tdlawyer replied 3 years ago.

I was just going to refer to the Land Registratioj Act 2002, s.48, which gives some support to the point I made.

Sorry, I found this after you rated the answer, but hope this is useful.

Tony