2nd Charge on a Property

Debt_Free_Chick

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.

You may not know anyone, but it's not that unusual. However, my comment

I presume that they ask you this question so that they can ascertain whether or not they can pay you the minimum advertised?

was about this comment of yours ....

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

Charges are not a reason to back out of a property purchase, provided there's enough equity in the property to settle them.

I think the deposit should have been returned before now, this obviously isn't going anywhere for the forseeable future

It's not that simple, as the OP has exchanged. The OP's solicitor has done the right thing by issuing the notice to complete. This effectively puts the ball back in the Seller's court. If the Seller cannot complete then the Seller will be forced to break the contract and it's this that will release the deposit so it can be returned to the OP

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.

Just to note that if it's the Seller that's responsible, there would be little point in suing someone who can't pay. The Seller clearly has money problems and simply getting a Court order to recover costs does not put money in the OP's hands.

goldiewil

The seller is definitely at fault, in any even we can sue him for breach of contract as we have excahgned. And you are right what is the use of suing someone who cannot afford to pay £14K? That is why we are trying to find a way of resolving this as opposed to suing. For all we know he would want to put the house back on the market with the hope of selling it for a higher amount!

silvercar

I cringe as I say this, but how much extra would you have to pay to enable the seller to complete? And how much extra is it costing you not being able to complete?

goldiewil

I am not too sure, the sellers solicitor would have to confirm but we have been told that he only has about £3K left after he pays off his lender (he has been in mortage arrears).

missk_ensington

In cases like this I think the lender who has the Charge owed to them has to just cut their losses and accept that they won't get it. It happens a lot in financial business, lenders are always having people not pay, going bankrupt, negative equity.... sometimes they do actually lose out.

However wouldn't the lender rather have £3,000 than nothing, if you fail to complete the purchase?

Debt_Free_Chick

missk_ensington wrote:

In cases like this I think the lender who has the Charge owed to them has to just cut their losses and accept that they won't get it.

But the charge prevents the seller from completing the sale of the property. The sale cannot go ahead until the charge is cleared - that's the whole point of having a charge. If the debt were simply to be written off, then there's no point in going through the Court process and cost of getting the charge.

regularsaver1

and i thought things were smooth after exchange

hope it works out for you

Debt_Free_Chick

goldiewil wrote:

The seller is definitely at fault, in any even we can sue him for breach of contract as we have excahgned. And you are right what is the use of suing someone who cannot afford to pay £14K? That is why we are trying to find a way of resolving this as opposed to suing. For all we know he would want to put the house back on the market with the hope of selling it for a higher amount!

Goldiewil - has your solicitor offered any advice at all?

Is it a case of "wait & see" if the seller can refinance and get rid of the second charge? If so, then you need to think carefully about this. He now has a CCJ on his credit record and getting a loan is going to be very difficult.

It seems to me that you cannot complete as the second charge prevents this (it prevents the sale going ahead).

And the seller cannot complete, due to the second charge. This seems to me that the seller has entered into a contract (by exchanging) that he cannot now complete. In general contract law, there is a condition called "capability" i.e. the contract must be one which is capable of being completed. It looks like this might fail the capability check, in which case I would expect the contract to be cancelled and for your deposit to be returned. If it were possible to go ahead at a later date, you would just exchange (again) and then complete.

But, I have to admit that I don't know if and to what extent capability applies to conveyancing contracts. Might be worth asking your solicitor though.

It seems crazy that you might be stuck in a loop e.g. exchanged, so must complete. But can't complete :eek:

There must be a way out

silvercar

The second charge lender may not be aware of the situation. If they were they MIGHT be persuaded to take 3k now and allow the remainder to be an unsecured debt and release the charge.

When they made the charge on the property they would presumably have thought there was sufficent security (otherwise what is the point). Since then mortgage arrears on the first charge have obviously built up and left the second charge with only £3k on sale.

The other point is that the first charge is very near to overtaking the property value. If mortgage arrears increase they will possibly look to repossess. In which case the purchase could still go ahead, buying off the lender in repossession rather than the seller.

goldiewil

Spot on! It has been a case of wait and see if he can get the bank to lift the charge off the property so that we can complete. Which left to that alone would be okay as the bank will eventually give in as there is no way they could get thier money back from the sale of the House. My main worry is, we only know through the Estate Agents, that he is trying to negotiate with the bank to sort this out. This may not be the case as everything he has done to date proves that he is a dishonest person. What if he is just waiting for us to withdraw form the contract and then put the house back on at a higher price with the hope of getting a bit more to pay this loan off. I'm sure the price of the house may have approciated slightly since April.