When buying, selling, or dealing with property, you may come across the term “charge on a property”. This is a legal concept that can have significant implications for both property owners and those with an interest in land. While often associated with mortgages, charges can arise in a range of contexts, and it is essential to understand what they are, how they work, and what they mean for your rights as a property owner or creditor.
At Blackstone Solicitors, we provide expert advice on all aspects of property law, including charges, secured lending, and disputes. This article explains what a charge on a property is, how it is created and enforced, and when legal advice may be required.
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What Is a Charge?
In legal terms, a charge on a property is a way of securing a debt or obligation against land or buildings. It creates a legal interest in the property in favour of a third party – often a lender – without transferring ownership.
In simple terms, a charge is a form of security. If the person who owes the money (the debtor) fails to meet their obligations – for example, defaults on a loan – the person who has the benefit of the charge (the creditor or chargeholder) may have the right to recover the debt by forcing the sale of the property or taking other enforcement action.
Charges are most commonly used in relation to:
- Mortgages and secured loans
- Court judgments and debts
- Local authority charges for care fees or unpaid council tax
- Commercial lending and business finance arrangements
Types of Charges
There are two main types of charges that can be placed on property:
- Legal Charge
A legal charge is the most secure and enforceable form of charge. It gives the chargeholder (e.g., a mortgage lender) a legal right over the property and is registered at HM Land Registry. It can allow the chargeholder to:
- Take possession of the property (in certain cases)
- Sell the property to recover the money owed
- Prevent the sale of the property without their consent
A typical example is a mortgage: when you borrow money to buy a house, the lender registers a legal charge over the property. You remain the owner, but the lender has the right to be repaid from the proceeds of any future sale.
- Equitable Charge
An equitable charge arises in situations where the formal requirements of a legal charge are not met – for example, if the charge is not properly executed or registered – but there is still a clear intention to create security over the property.
Although an equitable charge does not give the same powers as a legal charge, it can still be enforced through the courts, and the chargeholder can seek an order for sale. These types of charges often arise in more complex or informal arrangements, or where a dispute exists.
How Is a Charge Created?
A charge is usually created by a written agreement, such as:
- A mortgage deed or legal charge document
- A loan agreement accompanied by a charge over property
- A court order or statutory provision (such as a charging order following a judgment debt)
To be effective as a legal charge, the charge must typically be:
- Signed and executed as a deed by the property owner
- Registered at HM Land Registry (for registered land) or noted on the title deeds (for unregistered land)
- Compliant with any statutory formalities, such as those under the Law of Property Act 1925 or the Land Registration Act 2002
Failure to properly register a charge may result in it being treated only as an equitable charge or becoming unenforceable against third parties.
Examples of Charges on Property
Understanding how charges work in practice can help illustrate their importance:
Mortgage
When you take out a mortgage, the lender registers a legal charge over your property. This ensures that if you fail to repay the loan, they can ultimately repossess and sell the property to recover their money.
Second Charge Mortgage
If you already have a mortgage and take out another loan secured on your property, the lender will register a second charge. The first lender has priority in recovering money if the property is sold.
Charging Order
If someone is owed money following a court judgment, they can apply for a charging order to secure the debt against the debtor’s property. This does not give an automatic right to sell the property but can be a powerful tool for debt recovery.
Local Authority Charge
In some cases, councils may place a charge on a property to recover unpaid council tax or to secure repayment of care home fees under deferred payment schemes.
How Does a Charge Affect Property Owners?
If your property is subject to a charge, it may affect your ability to:
- Sell the property – the charge must usually be repaid or released before completion
- Remortgage or refinance – any new lender will require a clear or subordinate title
- Transfer ownership – you cannot gift or transfer the property without the chargeholder’s consent
- Discharge liabilities – the property may be used to satisfy the debt if the charge is enforced
In short, a charge can limit your freedom to deal with your property and, in extreme cases, lead to repossession or forced sale.
How Can a Charge Be Removed?
A charge is not permanent and can be removed (or “discharged”) in various ways:
- Repayment of the debt – for example, repaying your mortgage in full
- Agreement with the chargeholder – sometimes a creditor will agree to remove the charge
- Court order – in some cases, it may be possible to apply to court for removal
- Statutory time limits – some types of charges may expire or lapse under law
Once the charge is satisfied, an application must be made to the Land Registry to update the property title and remove the charge.
Can Charges Be Challenged?
In certain circumstances, a charge may be challenged or disputed. Common issues include:
- Improper registration – the charge was not correctly registered or executed
- Disputes over ownership or consent – for example, where a joint owner did not consent
- Fraud or undue influence – charges created under coercion or deception may be set aside
- Unfair terms or mis-selling – particularly in consumer lending or mortgage cases
If you are facing enforcement of a charge or believe one was registered incorrectly, seeking legal advice early is essential.
Why Are Charges Important for Lenders and Creditors?
For those providing loans or finance, a charge on property provides a strong form of security. It helps to:
- Minimise risk of default
- Ensure repayment of debts
- Prioritise recovery over other creditors in case of insolvency
- Provide leverage in negotiations or legal proceedings
Without a charge, a creditor may find it far more difficult to recover money owed, particularly if the debtor has limited assets or becomes bankrupt.
When Should I Seek Legal Advice?
You should consider speaking to a solicitor if:
- You are buying or selling a property with existing charges
- You are securing a loan against your property
- You have received notice of a charge or charging order
- You are involved in a dispute regarding a charge
- You need to register, remove, or challenge a charge
At Blackstone Solicitors, we act for both property owners and creditors in all matters involving charges. We advise on drafting, registration, enforcement, dispute resolution, and title review. Whether you need to protect your interests as a lender or understand your rights as a homeowner, we are here to help.
Conclusion
A charge on a property is a vital legal mechanism used to secure debts or obligations. While they are common in mortgage lending, charges can also arise from court orders, local authority debts, and private loan agreements. Understanding how charges work – and the implications they carry – is crucial for anyone dealing with property transactions, finance, or disputes.
At Blackstone Solicitors, we provide expert guidance on all aspects of property law across England and Wales. If you have questions about a charge on a property or need advice on how to proceed, contact our team today.
We have a proven track record of helping clients deal with the legal aspects of commercial and residential property. We will guide you through the process and ensure all checks are carried out swiftly and efficiently and we firmly believe that with the right solicitors by your side, the entire process will seem more manageable and far less daunting.
How to Contact Our Commercial Property Solicitors
It is important for you to be well informed about the issues and possible implications of both commercial and residential property law. However, expert legal support is crucial in terms of ensuring a positive outcome to your case.
To speak to our Commercial Property solicitors today, simply call us on 0345 901 0445, or click here to make a free enquiry. We are well known across the country and can assist wherever you are based. We also have offices based in Cheshire and London.
Disclaimer: This article provides general information only and does not constitute legal advice on any individual circumstances.
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