Second Charge holder rights

mukker30

Hello there. Some years ago my wife bought a house. The first charge was the mortgage company. There was also a second charge - a family member who paid a significant sum. We have now paid off the mortgage. I have three questions:

1) Can a second charge holder demand his or her money back e.g. through demanding sale of property or cash?

2) If the above is yes, what settlement can the second charge holder demand? If, for example, the second charge holder paid 30% of the value of the house when it was purchased 20 years ago, can he or she still demand 30% of its current value?

3) Would the above demand come via a court order?

Thanks in advance for any assistance

da_rule

Whether they can demand their money back will depend on the agreement put in place when the charge was registered. You need to see the relevant contract.

Again, in terms of amount to be repaid, there are a number of options. It could be the amount borrowed plus interest (either compound or otherwise) or it could be a percentage of value at the time of redeeming the charge (so if the money was worth 10% of the purchase price they may want 10% of the sale price). Again, the contract will give you this information.

mukker30

Many thanks. Unfortunately within our deeds paperwork we couldn't find any contract. Will need to keep digging.

da_rule

Is the property registered at the Land Registry? If so, a copy might be filed against the title.

xylophone

As far as I know, in basic terms, the second charge, like the first charge, secures a debt.

When the house is sold, quite logically, the first charge holder ( or successor in entitlement) is entitled to the repayment of his loan, then the second charge holder ( or successor in entitlement) to the repayment of his loan, and anything left goes to the owner of the property.

You need to find out whether the second charge entitled the family member to anything over and above the repayment of the debt, rolled up interest for example, or a share of the increase in value of the property.

As in post 2 above, check at the land Registry for any documentation held there.

Is the family member still alive and compos mentis? Have you asked him/her to check any paperwork still held?

AnotherJoe

When your wife bought this house was she not asked to sign an agreement specifying the terms of the repayment ? Was it when house was sold? Mortgage ended? Jupiter aligned with Mars?

If there was no agreement in writing, was there anything verbal agreed?

If not, if they are opposed as to what should happen, it could go legal and very costly,.

I have such an agreement. There is nothing registered with the land registry but there is a signed agreement as to what happens.

The optional triggering events are remortgage and house sale. (as the lender, its my choice to trigger or roll over to next event)

But if there is no triggering event in your wife's case, and the two dont agree, then your wife would seem to be under no obligation to sell or pay back, the "default" position without agreements would be when the house is sold, since that's what the second charge means, "give me the money when the house is sold".

At that point, then it gets trickier, how much should be paid over?
The percentage uplift of the house?
The original amount (which I guess would be about half of its worth then if you take inflation into account)?
Some other amount?
Could get nasty if there's no agreement.

Ethically FWIW my position woudl be % uplift of house value.

mukker30

Hi. Yes it is. I will check this avenue. Thanks

Richey_

Would it not to a degree depend on how the charge is registered. For example does it say charge of 30% on the house or does it say for example £30,000 against the house. IMHO the way it is worded would be a strong clue if they could demand repayment at now monies or then monies.

Land_Registry

Invariably private charges are made using form CH1

Panel 9 is used to add any provisions such as % interest rate for example.

That is not compulsory though so in some cases the 'details' may be recorded in a separate document which we would not see. However if you cannot find the legal charge/form CH1 I would suggest it is worth checking as others have suggested.

You can apply for a copy by post