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#Post#: 64275--------------------------------------------------
Legal Charge on a Property
By: Mome Rath Date: March 26, 2025, 1:20 pm
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Hello, I'm seeking some advice please about Land Registry form
CH1.
I have agreed to lend some money to a friend to help fund a
property purchase. He is to pay me interest, a bit more than I
am getting on the capital at present, and I am to have a legal
charge on the property until the loan is paid off. Another
friend is doing the same so we will both have a charge on the
property, which is about 10% of the property value. I have been
presented with a completed form CH1 which he got a solicitor to
complete. This is a different solicitor from the conveyancing
solicitor. However, the conveyancing solicitor says I need to
get independent legal advise before the form is registered (a
third solicitor). My problem is the cost of that advise will
make the loan unviable - it will cost me more than the extra
interest I would get. The conveyancing solicitor implied that
legal advice was a requirement for the agreement to be valid.
Is that correct? The property is worth a lot more than both our
loans, so my feeling is that the money should be safe. I am just
doing this to help out a friend, not to make the maximum amount
of money.
What do I need to look out for on a CH1 agreement?
Thanks
#Post#: 64288--------------------------------------------------
Re: Legal Charge on a Property
By: Southpaw82 Date: March 26, 2025, 3:39 pm
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There is no legal requirement for you to have independent legal
advice before taking the benefit of a legal charge on a
property. However, you run the risk if the charge isn’t correct.
#Post#: 64359--------------------------------------------------
Re: Legal Charge on a Property
By: Mome Rath Date: March 27, 2025, 4:08 am
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Thanks. So the CH1 being completed by a qualified solicitor is
not sufficient guarantee?
#Post#: 64372--------------------------------------------------
Re: Legal Charge on a Property
By: andy_foster Date: March 27, 2025, 5:00 am
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Who was this solicitor acting for?
#Post#: 64378--------------------------------------------------
Re: Legal Charge on a Property
By: Mome Rath Date: March 27, 2025, 5:08 am
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The friend I am lending the money to engaged a different
solicitor (not the one doing the conveyancing) to draw up an
agreement between the three parties. The CH1 was the result.
#Post#: 64380--------------------------------------------------
Re: Legal Charge on a Property
By: disgruntchelt Date: March 27, 2025, 5:13 am
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So the solicitor is acting for your friend, not you. Should the
solicitor make a mistake you won’t be able to sue them.
You should have got the solicitor to draw up the agreement with
the agreement your friend would pay their fees. That way the
solicitor acted for you
#Post#: 64409--------------------------------------------------
Re: Legal Charge on a Property
By: andy_foster Date: March 27, 2025, 7:03 am
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If you instruct a solicitor and ask him to tell you whether
placing a charge on your property to secure someone else's loan
is a good idea, they're going to say no.
Essentially, if your friend defaults on the loan, you could lose
your house.
#Post#: 64431--------------------------------------------------
Re: Legal Charge on a Property
By: Mome Rath Date: March 27, 2025, 8:25 am
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The charge is on the property being purchased by my friend, not
on my property. It is to secure my loan and the loan from
another friend. My understanding is that it allows me to
recover my money in case my friend doesn't pay back the loan for
whatever reason or circumstance. Is that the correct
interpretation?
**Oops, my bad - shouldn't have skim-read - Andy
#Post#: 64435--------------------------------------------------
Re: Legal Charge on a Property
By: PallasAthena Date: March 27, 2025, 8:41 am
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One reason for having the document reviewed by your own
solicitor is that there isn't just one form of Charge that can
be used. There are several forms of Charge which can be
registered using CH1. Some of the Charge wordings are more
beneficial to you than others if the borrower defaulted. You
need a solicitor to advise you on the best form of Charge to
protect you.
Another factor your own solicitor would take into account in
advising you is if your friend is going to be the 100% legal and
beneficial owner of of the house or whether he will be jointly
owning it with someone else. A Charge over only his ownership
share of a jointly owned house would complicate enforcement of
the Charge if that ever became necessary.
#Post#: 64466--------------------------------------------------
Re: Legal Charge on a Property
By: Southpaw82 Date: March 27, 2025, 10:34 am
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[quote author=Mome Rath link=topic=5686.msg64431#msg64431
date=1743081936]
The charge is on the property being purchased by my friend, not
on my property. It is to secure my loan and the loan from
another friend. My understanding is that it allows me to
recover my money in case my friend doesn't pay back the loan for
whatever reason or circumstance. Is that the correct
interpretation?
[/quote]
In theory, yes. Whether the court would grant you a possession
order (vital if the property is to be sold to pay off the debt)
is anyone’s guess. You don’t say whether the property is a
residential or commercial property, or whether the borrower will
occupy it himself or not.
What you do will reflect your attitude to risk. If you are
confident that your friend will repay you and you’re unlikely to
need recourse to the charge, go for it without advice. But if
not, you need to have your own lawyer look at it. You’re talking
(I assume) about a significant sum of money, so why skimp on
paying for legal advice before?
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