Free Traffic Legal Advice
Live cases legal advice => Non-motoring legal advice => Topic started by: Mome Rath on March 26, 2025, 06:20:57 pm
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A proper charge absolutely gives you protection - but with a lack of relevant details it’s impossible to say how much.
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Thanks guys, this is all most helpful. I can see now that both myself and my friend have approached this the wrong way. In particular, failure to consider the cost of setting up an apparently simple loan. My friend first asked the conveyancing solicitor, who said they couldn't act due to conflict of interest. So he got another solicitor to prepare the CH1. It now transpires that I should have instructed the other solicitor.
I was hoping for some information about what I should expect to see on a CH1. and what to look out for that could make it not valid. To my non-legal eye the form looks straight forward and all the names, addresses, full title guarantee, amount loaned, interest etc. all seem to be correct. I am lending to a trusted friend I have known for approx. 40 years. I consider the risk of him deliberately defaulting is very low. He is purchasing a residential property in his own name and will be living there. He is not a business or company. There is one other loan from another mutual friend. There is no other mortgage.
I am wondering now if having a 'charge on the property' gives me any useful legal rights in the real world if I have to guess whether a court would grant a possession order. My loan is approx. 10% of the current property value.
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I think, mome rath, you have everything back to front. Add the costs associated with the CH1 including getting your own review to the principal, the amount you are charging your friend. That way you get protected and the deal goes through. They get to pay a bit more each month.
If they can't afford that I think mome rath probably needs to take a long hard look at whether they should get involved at all.
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The OP has said that without the cost of legal advice, he would be earning more interest from his friend than he is currently, but that if he paid for legal advice, it would cost him more than the extra his friend would be paying him.
There is a saying about only lending money to friends if you are happy to lose both...
Not entirely sure what advice the OP is looking for, other than "free".
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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?
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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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.
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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
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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.
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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
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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.
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Who was this solicitor acting for?
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Thanks. So the CH1 being completed by a qualified solicitor is not sufficient guarantee?
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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.
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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