Legal Charge

Miroslav

I know nothing about housing but will explain the best I can.

A property is being sold for approx £190,000 with the money being split 4 ways.

Now, 1 of the 4 people has decided they wish to keep the house but due to the poor condition of the house, cannot get a mortgage to buy out the share of the other people, but wish to have the house in their name with a legal charge of £47,500 for each of the other registered people being registered simultaneously.

What does this mean? That the £47,500 isn't forthcoming and that it will only be available when the people whose house the name will be in, decide to sell it?

Thanks for any advice.

[Deleted User]

I doubt that this person or the other people can put a charge on the property unless they can prove a debt is owed to them. Potential money from the house isn't a debt.

It also doesn't seem to take into account the costs that arise from selling a house. And the house could be sold for less than the asking price.

I wonder if this person is trying it on (like getting a mortgage based on the value of this house in question in a rather clumsy and unworkable way).

I suspect they will just have to wait til the house is sold.

marksoton

So it's not being sold then.

I feel sorry for any potential buyer if this property is already being marketed.

I'd say the 1 persons position is untenable.

G_M

It means the property cannot be sold by the 'single owner' until the 3 Charges are removed.

ie - the 'owner' has to pay each Charge-holder the £47,500 he owes them, and they then remove the Charge, freeing up the sale.

This is usually done by the seller's solicitor giving a 'solicitors undertaking' to the buyer that he will pay the debt & get the Charges removed once the purchase price is received.

Of course, this asumes that when the time comes to sell, the property is worth £190,000.

If for example, the referendum results in a property crash, the value might drop and take some time to climb back to £190K. Who knows?

That is why banks no longer give 100% mortgages!

Eah Charge is usualky based on a Deed of some sort to formalise the loans by each of the 3 to the one who wishes to keep the property.

That loan can, of course, be paid off earlier than when the owner decides to sell, and the Charge would then be removed earlier.

Miroslav

deannatrois wrote: »

I doubt that this person or the other people can put a charge on the property unless they can prove a debt is owed to them. Potential money from the house isn't a debt.

It also doesn't seem to take into account the costs that arise from selling a house. And the house could be sold for less than the asking price.

I wonder if this person is trying it on (like getting a mortgage based on the value of this house in question in a rather clumsy and unworkable way).

I suspect they will just have to wait til the house is sold.

Well, it's a family who haven't lived there for a while but the mother kept the house running (reason unknown to me).

I think one of the sons wants to keep hold of the family home from a few years ago.

marksoton wrote: »

So it's not being sold then.

I feel sorry for any potential buyer if this property is already being marketed.

I'd say the 1 persons position is untenable.

She's received the papers today asking her to sign to agree to it. It's her brother who wants the house and she feels she needs to sign 'whatever'.

G_M wrote: »

It means the property cannot be sold by the 'single owner' until the 3 Charges are removed.

ie - the 'owner' has to pay each Charge-holder the £47,500 he owes them, and they then remove the Charge, freeing up the sale.

This is usually done by the seller's solicitor giving a 'solicitors undertaking' to the buyer that he will pay the debt & get the Charges removed once the purchase price is received.

Of course, this asumes that when the time comes to sell, the property is worth £190,000.

If for example, the referendum results in a property crash, the value might drop and take some time to climb back to £190K. Who knows?

That is why banks no longer give 100% mortgages!

So it's basically a free mortgage for the one who wishes to keep it? They want the house but not pay the full amount for it and potentially never sell it.

She just wants to know where she stands as she's disabled and on benefits, so knowing if she's getting money or not is important, which raises a new question, if she's due some money but it's being held in this way, does it mean she's classed as having property to this value?.....I'm not asking anyone to answer that, I think I may need to take her to CAB.

Thanks for the responses.

G_M

Sorry - 'she?'

Can you explain who is who? As I understand it:

* 4 people have inherited a property
* they could sell it and each walk away with £47,500
* however one of them ('she'?) wants to keep the property in her sole name
* since she cannot get a mortgage (and presumably does not have £47,500 x 3 in cash), she cannot afford to buy out the other 3
* so she is asking for each of them to loan her £47,500 (their share of the inheritance)
* to protect their loan (just as a bank does with a mortgage loan) and ensure it is paid back at some point, they are considering placing 3 Charges on the property
* this is all possible, assuming the 3 are happy not to get their share of the inhertance until some unknown time in the future (if ever, given that "and potentially never sell it.")

Miroslav

G_M wrote: »

Sorry - 'she?'

Can you explain who is who? As I understand it:

* 4 people have inherited a property
* they could sell it and each walk away with £47,500
* however one of them ('she'?) wants to keep the property in her sole name
* since she cannot get a mortgage (and presumably does not have £47,500 x 3 in cash), she cannot afford to buy out the other 3
* so she is asking for each of them to loan her £47,500 (their share of the inheritance)
* to protect their loan (just as a bank does with a mortgage loan) and ensure it is paid back at some point, they are considering placing 3 Charges on the property
* this is all possible, assuming the 3 are happy not to get their share of the inhertance until some unknown time in the future (if ever, given that "and potentially never sell it.")

Sorry, the 4 people are Mother, Brother 1, Brother 2 and Sister (who is my friend and 'she')

Brother 1 wants to keep the property but has failed to secure a mortgage so wants the other 3 to accept a legal charge so he can keep the house in his and his wifes name.

'She', the sister is the one who received the solicitors letter today asking her to agree and sign the agreement to this legal charge, or at least her £47,500 charge and one I am asking on behalf of.

Thanks for detailing. I understand now.

patman99

The way I read it, 4 persons have inherited a house to sell.
Each person will get an equal share (it won't be £47,500 as expected as they have yet to deduct the costs assocciated in selling a house).

1 person wishes to have the house and wants to put 3 charges of £47,500 on the property in the names of the remaining three persons.

1 other person is on benefits and needs to know if this 'money' needs to be declared.

Starting with the person on benefits. Assuming she is claiming Housing Benefit (or even Universal Credit) she would have to inform them she owns 25% of a property worth £x. The benefits agency will then decide if they will stop her benefits as they would if she owned 100% of the property.

If the 4 persons agree to this ridiculous idea of applying a charge of £47,500 for each of the 3 persons not going to live in the house, the person living in the house could come badly unstuck if they ever sold the house and the price had dropped.
They would still owe each of the others £47,500 regardless of whether or not there was enough equity in the house to clear the charges or not.

The best solution all round is for Miroslav's friend to refuse to sign and force the sale of the house. That way, she has her money.

Miroslav

patman99 wrote: »

The way I read it, 4 persons have inherited a house to sell.
Each person will get an equal share (it won't be £47,500 as expected as they have yet to deduct the costs assocciated in selling a house).

1 person wishes to have the house and wants to put 3 charges of £47,500 on the property in the names of the remaining three persons.

1 other person is on benefits and needs to know if this 'money' needs to be declared.

Starting with the person on benefits. Assuming she is claiming Housing Benefit (or even Universal Credit) she would have to inform them she owns 25% of a property worth £x. The benefits agency will then decide if they will stop her benefits as they would if she owned 100% of the property.

If the 4 persons agree to this ridiculous idea of applying a charge of £47,500 for each of the 3 persons not going to live in the house, the person living in the house could come badly unstuck if they ever sold the house and the price had dropped.
They would still owe each of the others £47,500 regardless of whether or not there was enough equity in the house to clear the charges or not.

The best solution all round is for Miroslav's friend to refuse to sign and force the sale of the house. That way, she has her money.

So even though the house has not sold, and could sell for less, it would be deemed she had this £47,500?

I'll tell her not to sign then, although it could cause major family issues.

G_M

Nearly, bu (I think) no quite!

patman99 wrote: »

The way I read it, 4 persons have inherited a house to sell.
Each person will get an equal share (it won't be £47,500 as expected as they have yet to deduct the costs assocciated in selling a house).
True (unless there are also other assets in the Etate to be shared), For simplicity I just accepted the figure so as to clarify what's going on. The actual figures may vary...

1 person wishes to have the house and wants to put 3 charges of £47,500 on the property in the names of the remaining three persons.
Yes, though strictly speaking it is each of the other 3 who put the Charges on the property.

1 other person is on benefits and needs to know if this 'money' needs to be declared. Ah! I missed that bit!

Starting with the person on benefits. Assuming she is claiming Housing Benefit (or even Universal Credit) she would have to inform them she owns 25% of a property worth £x.
No, she would not own 25% of the property.
She would have a loan to her credit of £47,500 (roughly!) which is secured against the property.

The property is not (and never was) hers.

Effectively she inherited £47,500 cash and then immediately gave it away as a loan.

The benefits agency will then decide if they will stop her benefits as they would if she[STRIKE] owned 100% of the property.[/STRIKE]had £47,500 in the bank.

If the 4 persons agree to this ridiculous idea of applying a charge of £47,500 for each of the 3 persons not going to live in the house, the person living in the house could come badly unstuck if they ever sold the house and the price had dropped.
Though that depends on the precise wording of the loans. It could be worded such that each of the 3 gets back 1/4 of any eventual sale price.
Alternatively it could be worded as £47,500 + annual interst at X%!

They would still owe each of the others £47,500 regardless of whether or not there was enough equity in the house to clear the charges or not.

The best solution all round is for Miroslav's friend to refuse to sign and force the sale of the house. That way, she has her money.

I assume mother and brother 2 have also received similar letters?

Have the 4 of them actually sat down and discussed all this? Considered all the implications? Given that (it appears) sister understands so little, I would guess not.

Surely that is the first thing to do, before getting a solicitor to prepare the Charge?

Has a loan agreement be discussed? Drawn up? Have the terms been discussed?

and critically, have the 3 of them discussed this objectively (without brother 1 present), ad then taken their own legal advice.......?

G_M

G_M wrote: »

Nearly, bu (I think) no quite!
I assume mother and brother 2 have also received similar letters?

Have the 4 of them actually sat down and discussed all this? Considered all the implications? Given that (it appears) sister understands so little, I would guess not.

Surely that is the first thing to do, before getting a solicitor to prepare the Charge?

Has a loan agreement be discussed? Drawn up? Have the terms been discussed?

and critically, have the 3 of them discussed this objectively (without brother 1 present), ad then taken their own legal advice.......?

Except this way she will be owed £47,500.

The alternative is to sell the property and she's likely to receive less, as patman pointed out!