Charge on a property.

WIAWSNB

Hopefully simple Q.

If there is a charge of, say, £150k on a property, payable on its sale, and the house - due to current market - achieves only £135k, or £130k after EA and conveyancing fees, wot 'appens?

Ta.

eddddy

Taking a step back…

Sam owes Alex £150k - it's secured by a charge on Sam's property.

So if Sam's property sells for £130k - that £130k goes to Alex. And Sam still owes Alex another £20k.

(But Alex has to agree to the sale. So if Alex thinks Sam is being dodgy and selling a £150k property for £130k - Alex can refuse to agree to the sale.

Or Alex might agree to the £130k sale if Sam pays the remaining £20k as well.)

user1977

A charge securing what? If it's a normal mortgage, the lender will (normally) not release it unless the borrower makes up the balance. Though they might accept the balance becoming an unsecured loan.

silvercar

The charge holder has to agree to release the charge. They often will only agree to do so if the charge is paid in full or an agreement is made on how and when the remaining amount owed will be repaid.

Sometimes charge holders dig their teeth in and refuse to allow the sale without the charge being paid in full. Sometimes they can be more pragmatic, particularly if it’s the only way they will see some of their money for a long time or risk getting a more unfavourable outcome. Eg if the charge was a second charge and a mortgage was the first charge, if the lender repossessed and sold the second charge holder may get less if the mortgage company also takes arrears of payments and selling costs.

WIAWSNB

Thanks, all.

Looks like the devil may be in the detail of the charge contract. But the gist appears to be that the full charge value is still owed, regardless of how it needs/can be paid.

Cheers.

silvercar

https://forums.moneysavingexpert.com/discussion/comment/82028291#Comment_82028291

Depending on the contract, there may be interest to pay too.