What is the registered charge on a property?

If you take out a mortgage to buy your home, your lender will almost certainly register a charge against it at the Land Registry. The charge does not transfer ownership. However, it will give the lender important rights, including the ability to sell your home if you default on your loan.

‘When borrowing to buy a property, most of us give little thought to how the lender protects their interest,’ explains Neil Shearer, a Conveyancer in the residential property team with Kidd & Spoor. ‘However, the creation of a legal charge will affect how you, as an owner, can deal with your property. Conversely, if you decide to lend money to someone, for example to get on the housing ladder, it can be a useful tool to protect your loan.’

In this article, Neil answers some of your frequently asked questions about registered charges on property.

What is a registered charge?

Although there are technical differences between a charge and a mortgage, people often use the words interchangeably. A charge is a legal interest in property, which the owner (called the chargor or mortgagor) creates in favour of a third party (the chargee or mortgagee). This is usually to secure debt, typically a mortgage used to buy a house. A charge gives the lender certain rights over the property. For example, they can sell the property and use the proceeds to pay off the outstanding debt if the borrower is unable to.

Most land is now registered at the Land Registry. If this is the case, to be legally effective, the charge must also be registered. It is then known as a registered charge.

If the land is not yet registered, then the creation of a legal charge will usually mean the owner must apply for registration of both the land and the charge.

Registration of a legal charge also provides a state-backed guarantee of its validity, so it is the preferred type of security for many lenders.

How does a registered charge affect me as a property owner?

The existence of a registered charge is unlikely to affect you on a day-to-day basis provided you comply with your mortgage terms; it is important to know what these are. For example, many standard mortgages will prevent you letting your property without your lender’s consent. There are certain statutory safeguards, but failing to comply with your mortgage terms could put your home at risk.

However, when selling your property or remortgaging, you or your solicitor will need to deal with any registered charge. First, you must check carefully the amount needed to pay off your outstanding debt. You will need to repay this to ensure the lender releases their charge on completion. Remember to factor this into your budget. The mechanics are usually quite straightforward, although this will depend on your lender. Having a solicitor who understands your lender’s detailed requirements can help ensure the process runs smoothly.

There is a restriction against my title at the Land Registry. Is this normal?

It is quite common for a lender to restrict a borrower’s ability to transfer or grant another charge over the property. Your property is their security for your debt; they may not want the hassle of having to deal with a third party or to risk their security becoming diluted. The restriction typically prevents the registration of a disposal or another charge without their consent.

During a sale, this is usually not a problem if you are using an experienced conveyancer. Provided the restriction clearly refers to the charge you are paying off, the Land Registry will cancel it automatically. However, your solicitor should check the wording of the restriction carefully. If it does not refer specifically to that charge, they may need to apply for its removal so your transaction can proceed.

Can you have more than one registered charge over a property?

In theory, there is no limit to the number of charges you can register against a property. However, many lenders restrict their borrower’s ability to take out a second mortgage, and you will need to check your mortgage terms and any restriction carefully. If you want to borrow more money, secured by a second charge, you may need your existing lender’s consent. They will want to make sure you can afford both loan repayments. They may also require your new lender to enter a deed of priority. This sets out how the lenders will deal with the property, and apportion the sale proceeds, should one of them realise their security. In practice, some borrowers prefer to remortgage for a larger amount than to negotiate a second charge.

I have finally paid off my mortgage, what happens next?

This depends upon your mortgage lender. Some charge an administration fee for releasing their security, particularly if you are paying your loan off early. Many lenders release their charge automatically once you have paid your debt in full. They should send you details of this with your final redemption statement. If in any doubt, speak to your lender.

Your solicitor can check Land Registry records no longer show the charge registered against your property. You should ask them to do this before putting your property on the market. Having to chase an old lender to formally release their charge could unnecessarily delay your transaction.

If I lend money, can I secure it with a registered charge?

Yes, but speak to your solicitor first. If you are acting commercially, for example, through peer-to-peer lending, you may require authorisation from the Financial Conduct Authority. If your main purpose is to help a family member, and you do not charge interest, it is unlikely you will require authorisation. However, the rules are complex, and the potential penalties for non-compliance significant. So, it is important to take professional advice. Our solicitors have experience in this area and can help guide you through the detailed requirements. If you are lending money to a company, the charge must also be registered at Companies House within the statutory time limit to be valid.

I am lending money to a family member; do I need to register a charge?

Perhaps you are considering lending money to help your child buy their first home. In this case, taking a legal charge over their property may seem a little formal. However, being clear about expectations at the outset, for example, when and how they should repay the loan can prevent ill feeling or disputes arising later. It can also help if you are concerned about treating all your children equally. Putting the arrangement on a formal footing can head off any suggestion of favouritism. There may even be issues which are not immediately apparent, which discussion with a trusted advisor may bring to light. For example, what do you want to happen if your child runs into difficulties repaying? Setting this out in a separate loan agreement, but referred to in the registered charge, would also help to keep those details off the register and private.

Having a registered legal charge means you should be able to recoup your advance even if your child’s circumstances change. For example, if they lose their home because of marriage break-up or insolvency. The loan will also form part of your estate should you die – unless, of course, you agree to write it off in that event.

How we can help

If you have plans that involve a registered charge, then discussing your intentions with your solicitor in advance will mean they can tailor arrangements to suit your individual circumstances.

For further information, please contact Neil Shearer in the residential property team on 0191 297 0011 or email ns@kiddspoorlaw.co.uk.

This article is for general information only and does not constitute legal or professional advice. Please note that the law may have changed since this article was published.

Selling a property through the modern method of auction

Online auctions, especially the ‘modern method’ of auction, continue to grow in popularity. Last year saw a 40 per cent rise in the value of property sold at auction, much of this online. But what exactly is the modern method of auction, and is it something you should consider?

‘For a seller there are certainly some advantages to the modern method of auction, such as speed and a defined timetable,’ admits Neil Shearer, a Conveyancer in the conveyancing team with Kidd & Spoor Solicitors Ltd. ‘However, there are also pitfalls for the unwary and so it is important to consider how it would work for you.’

Neil Shearer answers some common questions about the modern method of auction.

What is the modern method of auction?

Typically, the modern method of auction takes place online over a fixed period. As a seller, you enter into an agreement with the auctioneer who invites bids for your property. This usually takes place on a special online platform where the mechanics are similar to an eBay auction, but for property.

At the end of the agreed period, the winning bidder must pay a reservation fee. This varies, but is typically five per cent of the purchase price. The successful bidder then has a fixed period, usually 28 days, to exchange contracts, and a further 28 days to complete their purchase.

How is the modern method of auction different?

Commentators sometimes call the modern method of auction a hybrid model as it combines elements of a conventional sale and auction.

  • Agents – an agent promoting a property via the modern method of auction may lack the professional qualifications of a traditional auctioneer, although some work in partnership with a local estate agent who will advertise your property, conduct viewings, and deal with enquiries. In this respect, it can be more like a conventional sale than an auction. However, the agent may use the auction to drum up interest.
  • Timeline – unlike a conventional sale, there is a strictly defined timeline.
  • No binding agreement – unlike a traditional auction, there is no binding agreement when the auction ends. The winning bidder must pay a reservation fee, but there is no obligation to proceed until exchange of contracts. Either of you may change your mind before then, but the buyer will lose their reservation fee unless it is your decision.
  • Reservation fee – because the reservation fee is a substantial sum, there is a strong incentive for them to proceed.
  • Legal pack – as with a traditional auction, the buyer needs to check your title to the property before bidding. They will do this by examining the pack of legal information which needs to be prepared in advance for all bidders.


Who prepares the legal pack?

Your solicitor should prepare this. It can take some time to collect all the relevant details, particularly if your property is leasehold, and it is necessary to factor in enough time to obtain all the searches.

Some online auctioneers offer to prepare the legal pack inhouse, or through an associated conveyancer. While this may seem appealing, it may not be your best option.

The pack must be accurate and comprehensive, not only to give bidders the information they need, but to safeguard you. A misrepresentation could make you liable to pay compensation in the future, while an undisclosed title issue could derail your sale even after the auction has ended.

It is important the pack is prepared by somebody who fully understands both the legal issues and your individual needs, and who will always put these first.

If you are considering selling in this way, talk to us as soon as possible. Having a comprehensive legal pack is essential if you want to appeal to as many serious bidders as possible.

Who bears the costs in a modern method auction?

With a conventional sale, both parties bear their own legal costs. The seller pays the agent’s fees, usually from the sale proceeds, and so there is little or no expenditure upfront for either party.

An auction, traditional or modern, generates more upfront costs, for example, in preparing the legal pack. Administration and sales fees can vary between online providers, and not all costs may be immediately apparent. It is important to read the terms of any agreement carefully. If in doubt, your solicitor can help clarify things.

With the modern method of auction, the costs of selling are often passed on to the buyer. As a seller, you may find this attractive. On the other hand, it could deter some potential buyers from bidding.

What are the advantages of the modern method of auction?

The greatest benefit for many is the shorter timescale. A conventional sale on average takes 12 weeks from accepting the buyer’s offer. With the modern method of auction, this drops to 8 weeks.

When estimating timescales, you should also factor in the time it will take to prepare the legal pack. However, the time taken to secure an offer using the modern method of auction is typically less than half that of a conventional sale, which means the modern method of auction may be quicker overall.

Although there is less certainty than with a traditional auction, the reservation fee should reduce the risk of the transaction not proceeding. An estimated 30 per cent of conventional sales fall through. In contrast, according to one online agent, only five per cent of modern method auction sales fail to complete.

You will also have a fixed timetable to work to, which suits some sellers.

What are the disadvantages of the modern method of auction?

The modern method of auction may appeal to a wider range of buyers than a traditional auction.

However, the price you achieve may be less than with a conventional sale which will benefit from a longer marketing period and appeal to more buyers.

The reservation period gives buyers more funding options than a traditional auction, but the modern method of auction is not generally suitable for those needing to sell their own property to proceed. In addition, some buyers may find the risk associated with the reservation fee and associated costs off-putting.

Should I sell my property using the modern method of auction?

This is very much a personal decision and will depend upon your circumstances, your property, and market conditions.

With a desirable well-presented property in an area with high demand, you may get a better price using a conventional agent.

Conversely, if your property has particular problems, for example, a short residential lease, then a traditional auction can provide greater certainty; the successful bidder is committed to the purchase as soon as the auctioneer’s gavel falls. Under the modern method of auction they may change their mind, although the payment of a substantial reservation fee makes this less likely.

Before committing yourself, always read the documentation thoroughly. This applies to your agreement with the online auctioneer and the agreement you will enter into with your buyer. As with a traditional auction, the sale terms will be set well in advance with little scope for negotiation or changing circumstances once the auction has ended. It is important to understand the terms fully and to have confidence they meet your requirements.

How we can help

With the modern method of auction, things can move very quickly; when the auction ends, you will only have a short time to complete.

Having your own solicitor on board from the outset, to prepare your legal pack, means they can check your title and pre-empt any issues which could otherwise derail your sale.

We will be best placed to manage the entire conveyancing process, so you can complete on time, confident that your interests are being put first.

For further information, please contact Neil Shearer in the conveyancing team on 0191 2970011 or email wb@kiddspoorlaw.co.uk