2nd Charge on a Property

epoman

My take on matters:

I am not a conveyancing solicitor and cannot advise you on correct conveyancing procedure (nor in fact can the other posters on this thread). My understanding is that your solicitor should have obtained the vendors solicitors undertaking to repay any charges registered on the property. A search would have been done just before completion to check what charges need to be paid. It seems that this is when the charge in question came to light.

You should ask your solicitor to put in writing what he advises that you do now. This is vital as there is still scope for him to advise you negligently. Whatever you do it is better that you do it on his advice, not as a choice you have made independently. I suspect he will say that you should walk away from the purchase.

goldiewil wrote:

I really suspect the only reason why our solicitor gave the notice to withdraw from and get our money back is because he would like to get paid for his services and from the looks of things isnt prepared to do much to help resolve this issue

No, he did it to force the sellers hand and to get you out of this messy transaction to enable you to get the deposit back from vendors solicitor. I am sure however that he will still want to be paid for the abortive purchase.

On the assumption that you cannot complete (and I do not suggest you do unless the charge is lifted), your priority should be to recover your deposit. Only then can you assess the extent of your losses. You clearly have a case against the seller for all of your losses arising out of his failure to complete, but as he has no money this is probably of little value to you.

You should then ask your solicitor (or his firms senior partner) to put in writing to you exactly how this situation arose and what could have been done to prevent it. It is hard to know what to do without knowing all the facts and this forces the solicitor to commit to a version of the events.

Do not waste your time with complaints to the Law Society. This is not a (mis)conduct matter. In failing to pick up details of the charge before exchange of contracts your solicitor has either been negligent or he has not. If he has then you will be able to recover your losses from his insurers instead of the seller. These losses may be considerable.

Do not assume that your solicitor has been negligent as others here will have you believe. It is not clear to me that he has been. It is the actions of the seller that has put you in this position.

Once you have a written explanation from your solicitor you should take professional advice. Ask the Law Society (020 7242 1222) to recommend a professional negligence solicitor local to you. I am sure you will be able to find someone who will give you initial advice without cost to you.

missk_ensington

epoman- The point is SOMEONE is to blame and it isn't the OP. So as a result, SOMEONE is going to get sued, either for Negligence or Misrep.

Why would you want to prevent the solicitor from acting negligently further? If there is any possibility you could end up issuing proceedings, you would want him to dig a bigger hole to strengthen your case and provoke an OOC settlement. I don't expect they'll touch their indemnity unless it's unavoidable, think they'd rather pay from their own pocket.

Debt_Free_Chick

missk_ensington wrote:

However, I think in a court of law the other side would say to the OP 'Well you knew about the first charge but still agreed to go ahead, the fact a second charge was applied is irrelevent, as you would still most probably be in this situation had a second charge not been placed, but purely on the basis of the first charge'

But there's a charge over every property in the vast majority of cases, as there's a mortgage in place. If we are not to go ahead because of a charge, then the housing market would stagnate and none of us would ever move. In fact, we wouldn't be in our present properties.

A second charge is less enforceable than a first one. The lender with the first charge gets priority, so that when the property is sold, the proceeds must be used to pay that debt first. It's only if there's money left over that the lender with the second charge gets a look in.

The charge is not the buyer's problem, as it's the seller that owes the debt. However, the charges may mean that the property is not "unencumbered" and that the seller is not in a position to complete the sale. In this case, I think the buyer has valid grounds to pull out of the sale, even after exchange, as the seller cannot complete.

In contract law terms, I think that this contract is unenforceable. The buyer should not lose out here - the seller should pay the buyer's costs. However, it does seem as though the seller doesn't have the means to pay.

The deposit will be with either the seller's solicitor or the buyers. It should be returned to the buyer, without difficulty, if the sale does not complete.

silvercar

your solicitor should have obtained the vendors solicitors undertaking to repay any charges registered on the property.

My solicitor did this as soon as he was notified of a second charge by the seller's solicitor. The buyer's solicitor is obliged to ensure that there are no charges on the property on commission to protect the buyer's mortgage company as well as the buyer. Either he can get an undertaking from the seller's solicitor to do this or he can take it on. Of course if hte seller's solicitor refused you would wonder why. Whether the seller was negligent in not informing his solicitor or the solicitor is, its hard to say.

missk_ensington

Debt_Free_Chick wrote:

But there's a charge over every property in the vast majority of cases, as there's a mortgage in place. If we are not to go ahead because of a charge, then the housing market would stagnate and none of us would ever move. In fact, we wouldn't be in our present properties.

I don't know anyone with a Legal Charge on their property because they've got £14,000 of debt that they have continuously avoided paying until there is no option but to charge it on the property.

I think the deposit should have been returned before now, this obviously isn't going anywhere for the forseeable future, and the OP has no choice but to sue someone if the sale falls through as she will still have to pay solicitor and other costs.

Where is the OP currently living?

goldiewil

We are currently renting from a private landlord. We had to withdraw our notice to vacate when this matter was discovered.

I have just re-read the charge on the title deed and it states that it is an "EQUITABLE CHARGE CREATED BY AN INTERIM CHARGING ORDER of the court". Does the fact that it is an INTERIM charge make any difference?

epoman

missk_ensington wrote:

epoman- The point is SOMEONE is to blame and it isn't the OP. So as a result, SOMEONE is going to get sued, either for Negligence or Misrep.

The correct cause of action here is breach of contract against the seller if he fails to complete. There will only ever be a claim for negligence against the solicitor if he should have picked up on the charge prior to exchange.

missk_ensington wrote:

Why would you want to prevent the solicitor from acting negligently further? If there is any possibility you could end up issuing proceedings, you would want him to dig a bigger hole to strengthen your case and provoke an OOC settlement.

Whether the solicitor is subsequently negligent has no bearing upon whether he was negligent in the first place. If he can put things right then surely this is to be preferred?

My point by the way was not that the OP should try to prevent any further negligence but that she should get advice from her solicitor on the way forward so that the end result is as a consequence of his advice to her and not a choice that she has made herself. If he gets it wrong then that will be a completely new and seperate negligent act for which she can sue him. If it was her own choice then there is no one to blame but herself.

missk_ensington wrote:

I don't expect they'll touch their indemnity unless it's unavoidable, think they'd rather pay from their own pocket.

Depends upon the excess on their policy, the premium hike they expect as a result and the size of the claim.

silvercar wrote:

My solicitor did this as soon as he was notified of a second charge by the seller's solicitor. The buyer's solicitor is obliged to ensure that there are no charges on the property on commission to protect the buyer's mortgage company as well as the buyer. Either he can get an undertaking from the seller's solicitor to do this or he can take it on. Of course if hte seller's solicitor refused you would wonder why. Whether the seller was negligent in not informing his solicitor or the solicitor is, its hard to say.

The point of the undertaking is to ensure that the purchase funds are used to discharge the charges, rather than being released to the seller for him to run off with. It is not there to protect against a seller being fraudulent as is clearly the case here.

missk_ensington wrote:

I don't know anyone with a Legal Charge on their property because they've got £14,000 of debt that they have continuously avoided paying until there is no option but to charge it on the property.

Happens all the time.

missk_ensington wrote:

I think the deposit should have been returned before now

Hopefully it will be repaid once the seller fails to complete.

missk_ensington

Whoever you go gunning for, make sure you include the rent in your costs (if it is more than your mortgage, you are able to claim the difference)

No idea, but if it did I'm sure your solicitor would have told you

epoman

goldiewil wrote:

I have just re-read the charge on the title deed and it states that it is an "EQUITABLE CHARGE CREATED BY AN INTERIM CHARGING ORDER of the court". Does the fact that it is an INTERIM charge make any difference?

Even if it was not final you would be unwise to complete. Ask your solicitor for his specific advice. I don't think the lender will allow him to complete irrespective as they would not risk being unable to take a 1st charge.

silvercar

And I niaively thought that once you exchange completion was assured!

I was very nearly in your situation, except the second charge arrived just before exchange rather than after, so the solicitor knew about the charges and to ensure there would be enough money to pay the charges off.