A legal charge allows a lender to secure the money they have lent to an individual or company. It is a legal document signed by the borrower which is registered against the property at the Land Registry to alert any potential buyer of the existence of the debt. A legal charge is also known as a secured loan. Should you wish to instruct us to draft and register a legal charge against our property please complete and return this Loan agreement and Legal Charge questionnaire.
Please note that we would always advise you to seek independent, professional legal advice before lending monies or entering a binding contract to do so. In particular, if lending is carried on by way of business it is likely to be caught by the FCA’s regulatory regime.
Legal charges for monies already lent or intended to be lent
Parents who have lent money to their children to help purchase a property and wish for the funds to be repaid may wish to make use of a legal charge. Similarly, friends and other relatives may lend monies to someone who owns a property and is willing to provide them with a secured charge. Here, the legal charge would be tailored to the particular circumstances. This could include details on whether there would be any monthly repayments or indeed whether the funds would be repayable on the sale of the property only.
Legal Charges for separating couples
Another family-based legal charge could be obtained in the form of a Mesher Order. A Mesher Order, sometimes known as an ‘order for deferred sale’, is an order for the family home to remain in the couple’s joint names until a certain trigger event happens, at which point the property would be sold, the sale proceeds divided and a chargeback given to the person in favour of the Order, exercisable on the occurrence of specified events.
You may want to seek a Mesher Order if you wish to remain in the family home with your children but do not have the financial means to take over the mortgage on your own. This would usually mean the property cannot be transferred into your sole name and so you would need your former spouse to remain on the mortgage. This does not necessarily mean they will still have to contribute towards the monthly repayments.
Where there are no children, the court can still make a similar order for one party to remain in the marital home and thus postpone the sale, which is known as a Martin order. As with Mesher order, there is a trust of land and the parties hold the property as tenants in common in defined shares. However, under a Martin order, the resident party is given an entitlement to occupy the former matrimonial home for life or until re-marriage. A legal charge reflecting this trust position is entered on the Land Registry.
Provisions in the legal charge
It is important to be aware that the terms of the legal charge will be a public document registered at the Land Registry. This would mean anyone could see the terms of the arrangement. Should you wish to achieve greater confidentiality then we could prepare a separate loan agreement which would work in tandem with the legal charge and remain confidential between the parties.