2nd Charge on a Property

goldiewil

My Husband and I exchanged on a Property on 17th July with a completion date set for 8th August 2006.
Two days before completion we were informed by our solicitor that following the final searchs, a 2nd charge had been put ont he property - meaning the seller may have either defaulted on a loan or used the house as a security for a loan he has defaulted on. we have been told it is about £10,000
Problem is he does not have enough equity on the house to pay off the loan after he sells it. It has been 2 weeks now since we were supposed to complete and he hasnt managed to get the finance company he owes to leift the charge. As we are not able to speak with him directly (only through the estate agents) we do not even know if he is really working on getting the charge removes. We understand his current lender has tried to reposses the house on 2 occassions in the past.

Our solicitor gave 10 days notice to complete or we withdraw from the transaction.

What can we do? we love the house and do not want to loose it.
Can we sue (as he doesnt even have money to pay off the loan- what use would it be). Can we sue him directly without using solicitors???

Please help we are tearing our hair out!!!

lynzpower

my understanding of this is that he needs to negotiate to take the debt on unsecured with his lender, ( ie the difference)

goldiewil

We have been told by the Estate Agents that he is trying to negotiate with the bank. We however have no way of verifying if this is true.

missk_ensington

I dont think there is anything you can do other than be prepared to wait, or accept you've lost the house. It is just a wholly unfortunate situation for you, and one of those that can't be helped.

The problem is with the Seller who clearly thought he could sell the property without the Charge being noticed (My Mum has freefhold property, and has had Leaseholders try to do this many a time but don't realise the Charge is listed at Land Reg).

The house is unsellable (if thats a word?!) until the Charge is removed, but won't be removed until the debt is settled so you could be waiting a while!

WestonDave

The obvious solution is if you really want the house, pay an extra £10k to enable the charge to be cleared. I suspect that isn't an option as most of us push it to the limit when buying.

The next best alternative maybe to somehow make a deal with the second lender whereby if they agree to remove their charge you pay them an amount towards the loan repayment - say £1000 - which may go someway to compensating them for losing their security (albeit by the sounds of it the security isn't worth the paper its written on as there isn't enough equity).

I'm not sure how the latter could practically be acheived with Data Protection and client confidentiality issues or if it is something you would consider. Even then it may be hard going unless the second lender can be made to realise how little equity their charge is based on.

Beyond that - if you can - sit it out and wait for one of the lenders to lose patience and call in the loan at which point you can buy from repossession.

missk_ensington

Don't even consider paying smoeone's loan off for them!! That isn't 'moneysaving' thats just downright daft! Besides, lender would never give you another 10k on your mortgage for those purposes.

I'd give it up and put it down to experience, its unfortunate but that's life and no doubt you'll find something else you love soon! If ypou wait until Sep/Oct its a buyers market as few people want to be moving just before Xmas

silvercar

I understood that on exchange the seller's solicitor took responsibility for ensurng that the sale monies would be sufficient to release all charges.

If you have actually exchanged, as opposed to signed the papers in readiness to exchange, then the sellers solicitor has a problem. He has entered the seller into a contract which he cannot complete. You could take the seller to court to force vacant possession.

If you have signed the papers and not formally exchanged then you need to sit it out. At some point the seller will either be repossessed or the holder of the second charge will realise they are not going to see any money unless they release the charge. If the seller goes into arrears on the mortgage the mortgage, being the first charge, will soon swallow up all the equity leaving the second charge with nothing!

We had a similar thing happen to use, formal exchange was delayed until the seller's solicitor was satisfied that there were sufficient monies to pay off all the charges.

goldiewil

We have actually exchanged. We understand that the charge was put on the property recently and therefore the seller himself may not have been aware of it.

missk_ensington

goldiewil - Just checked my legal books and you need to sue YOUR solicitor for Professional Negligence, but only if you have sustained a financial loss, ie, you're now paying rent that you shouldn't have to pay/staying in a hotel.

Basically they have not done the job you've paid them to do, they have not made enquiries at the Search stage, they should have written to Sellers solicitors.

Also, I'm assuming someone has got your mortgage/deposit?

Need more details for me to tell you what to do next, but you have a very good case

Bossyboots

I thought you registered a priority when you did a search which meant that if anyone tried to register anything against the property in your priority period, you were notified of it. This might take a bit of unravelling to work out who is actually at fault, but you should certainly be asking your solicitor for a full explanation of how you came to exchange and then a charge was registered. I would be interested in their reply and don't let them fob you off. You need to know the date of the charge and the date of registration.

missk_ensington

Bossyboots- the OP's soliciots is at fault 100% as they have been negligent in their enquiries. Why do you think you use a solicitor to buy/sell your house? Because us laymen are not expected to know about legakl charges etc, and from the sounds of this solicitor you want to double check a Housing estate isn't planned next door or anything, as he may well not have checked.

What concerns me is your money, are you paying your mortgage now as I assume the mortgage money has been downloaded from the lender? The Seller hasn't been given it yet, obviously, (or has he?!?!?) so I'm guessing its in the Solicitors client account, thus he owes you 4.5% a day on it, plus costs incurred due to his negligence.

Think you need to seek proper Legal advice with a view to suing. You could easily come out with a few grabd...just be thinking of what costs this might have incurred as you can only sue for what you've legitimately lost as there are legal clauses that do not allow personal gratification from court action.