Securing a second charge on a property - can the first charge prevent this?

mckmeister

Thank you for your prompt response Richard - so am I right in understanding that a restriction does not have to be agreed to by the first charge (mortgage lender)?

And on a second note apart from the case of a repossession am I right in understanding that if I successfully registered a restriction that the property could not change hands or even be remortgaged without me having to remove the restriction first?

Thanks again, you've been really helpful

pete1968_2

You will probably need to apply for a form N restriction.

Form N (Disposition by registered proprietor of registered estate or proprietor of charge – consent required) - wording as follows:-

No [disposition or specify type of disposition] of the registered estate [(other than a charge)] by the proprietor of the registered estate [, or by the proprietor of any registered charge, not being a charge registered before the entry of this restriction,] is to be registered without a written consent signed by


I]choose [/I][I][B]one[/B][/I][I] of the bulleted clauses[/I

• [name] of [address] [or their personal representatives] [or [their conveyancer or specify appropriate details]].
• I]name[/I of I]address[/I [or their personal representatives] and I]name[/I of I]address[/I [or their personal representatives] [or [their conveyancer or specify appropriate details]].
• I]name[/I of I]address[/I and I]name[/I of I]address[/I or the survivor of them [or by the personal representatives of the survivor] [or [their conveyancer or specify appropriate details]].
• I]name[/I of I]address[/I or [after that person’s death] by I]name[/I of I]address[/I [or [their conveyancer or specify appropriate details]].

You will need the consent of the registered proprietor/s of the title before this restriction may be entered on the register. (You won't need the consent of the first chargee to enter a restriction).

Once the restriction is in place it will prevent a disposition by the registered proprietor. It would not prevent the first chargee selling the property under a power of sale for example.

How many people own the property and who has signed your charge document? You said in your first post that there was an agreement for a second charge, was this in writing and has the second charge document now been executed. Does the wording of the second charge 'charge the property' or is it worded as a loan? If it doesn't attach itself to the property then you might have a problem without a court order.

If you are unable to register your second charge due to the restriction in a first charge then the charge may be protected by way of an agreed or unilateral notice.

If you are applying for an agreed notice you must lodge form AN1 and provide the second charge or a certified copy of it.

If you are applying for a unilateral notice you must lodge form UN1 setting out in a statement in panel 12 or a conveyancer’s certificate in panel 13 details of the charge, including the date of the charge and the parties.

Obviously I don't know the situation so the above is info only.

mckmeister

Hi pete1968 I really appreciate your detailed response that has solved a number of my queries.

The owner is one single individual and the original agreement was a second charge agreement (whereby it 'charges the property') however I have since realised that first charge lenders do not always allow second charges (and let's face it if I was in there position I wouldn't). Because myself and the owner have developed a good rapport he is happy to fill out new paperwork for the agreement as a second charge looks unlikely - so in the light of your comment I was thinking of going the form N restriction route.

However because I have raised the value of the property by £30,000 even if the guy got repossessed i'm sure the bank would get there money back and therefore it would be a shame in the event of a repossession that I would not get atleast some of my money - is there any instruments that would allow me to achieve this?

Also is the agreed notice or unilateral notice in addition to the restriction (or is this if I was going to use the existing second charge paperwork)? Would an agreed notice or unilateral notice cover me in the event of a repossession?

Sorry for all the questions and thanks for your help so far, its really good of you.

I'll private message this to you because i'm not sure if you will be updated that I have posted.

DVardysShadow

Richard_Webster wrote: »

You could certainly try registering a restriction but this would only help if the borrowers ought to sell - he would have to approach you to remove the restriction - but if he defaulted on this first mortgage and it took possession and sold it would overreach subsequent entries on the register and therefore could effectively ignore your restriction.

To me, it seems acceptable that the first charge could overreach a restriction. But ....

mckmeister wrote: »

However because I have raised the value of the property by £30,000 even if the guy got repossessed i'm sure the bank would get there money back and therefore it would be a shame in the event of a repossession that I would not get atleast some of my money - is there any instruments that would allow me to achieve this?

.... if the property were repo'd and sold by the first charge holder and there were a surplus, would the lender not have to take into account the restriction before simply putting a cheque for the surplus in the post to the former owner?

Richard_Webster

.... if the property were repo'd and sold by the first charge holder and there were a surplus, would the lender not have to take into account the restriction before simply putting a cheque for the surplus in the post to the former owner?

Don't think so - a restriction only implies that money might be due to the restrictioner - only have a duty to pass change on to any second mortgagee of whom they have had notice.

Also the problem with a restriction - as Pete1968 has pointed out - is that without the consent of the registered proprietor it is difficult to have a restriction registered. OP would have to approach him with a "If you don't agree to this I will do nasty things to you now...."(whatever other nasty things he can legally do).

pete1968_2

Hi Mckmeister,

The registered proprietor (rp) will have to sign the application form RX1 to consent to the entry of the restriction being made in the register.The restriction will then "restrict" the rp from making a disposition without your consent (sale for value or further charge). It won't as has previously stated stop a mortgagee in possession.

With regards to the Agreed or Unilateral Notices, you need the instrument in place which creates the legal interest before you can use this method. In other words the second charge document will need to have been executed and it has to charge the said property.

How was the original agreement arranged. Was it a writen contract or a verbal agreement. (These aren't direct questions to you but more something you need to think about) A correctly written agreement may enable the noting of an Agreed Notice or Unilateral Notice in place of a second charge. A Transfer under power of sale of a first legal charge would override both of these.

Also worthy of reading is S.77 of the Land Registry Act 2002 which establishes a right of action for breach of statutory duty against anyone who applies for a notice or restriction without reasonable cause. The right is in favour of any person who suffers damage as a consequence. (just in case!!!).

Please also note that both a restriction and/or a Notice may be cancelled by the rp on a suitable application to do so. Obviously evidence is needed to do this so just be sure of your position and seek legal advice in doubt.

Your relationship appears amicable at the moment. If the weather changes (and I'm sure it won't) you have to think of the worst case.

The other thing is that whilst your work may of added £30k to the property, a first chargee under power of sale is duty bound to sell at the highest possible price, this might not be the true value. However, they still may recover any shortfall and expenses. Expenses and legal fees coupled with interest can soon mount up.

Any surplus should be passed on to you afterwards if your interest is correctly noted.

All the best

Sassaboo_2

I have a question regarding placing a charge on a property; having read all of the postings. If there is no mortgage and the poperty is owned outright and a charge is placed on a property and there are no other charges; who else (after the charge is placed on the property) can take money form the owner e.g. credit card companies, bank that has lent money (all unsecured). What about if the person who owns the house dies, what happens if there is a charge on the property, does the person who placed the charge have to be paid first before all others?