sapphire
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Post by sapphire on May 12, 2020 18:09:26 GMT
For a loan to an individual secured against property, if the legal First Charge has been properly registered at the Land Registry and if the lender had undertaken appropriate due diligence checks as regards the borrower's background, can anything override this first charge?
Say if after the loan was made in good faith and after appropriate due diligence which did not reveal issues with the borrowers background or property, the borrowers becomes the subject of an Unexplained Wealth Order or an order under the Proceeds of Crime Act (or indeed an order under any other Act), would these supersede the lender's first charge loan, and so the lender could then lose out or would the lender still have priority for the loan amount?
Are there any other circumstances in which a lender holding a registered legal first charge would have to relinquish the first charge rights to someone else and so (potentially) lose out on the amount lent despite the current property value exceeding the loan amount?
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sapphire
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Post by sapphire on May 13, 2020 16:52:16 GMT
@wallstreet
To clarify, I don't have a specific case which impacts me personally to make it worthwhile to seek advice from a lawyer.
I am just interested in being aware, at a high level, what risks, if any, exist of lending based on a first charge, of this form of security being superseded.
Various potential risks impacting P2P investments are discussed on this forum and as registered first charges are used extensively for P2P lending, I thought this aspect may be of interest to other forum readers too and someone with knowledge may possibly be able to throw some light and highlight potential risks in this regard.
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Mousey
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Post by Mousey on May 13, 2020 17:35:18 GMT
You ask a very specific question to ascertain risk but it might be more worthwhile to ask a more general question as to what risks exist in P2P. Many lenders on the P2P platform Lendy had/have perfectly legitimate first charges but will still lose money.
However to answer your direct question - I know of at least one P2P property where the first charge didn't include the whole site thus diminishing re-sale value. I'm also aware of property where a supposed second charge was registered along with a "deed of priority" which might purport to replace the first charge.
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Greenwood2
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Post by Greenwood2 on May 13, 2020 19:11:11 GMT
For a loan to an individual secured against property, if the legal First Charge has been properly registered at the Land Registry and if the lender had undertaken appropriate due diligence checks as regards the borrower's background, can anything override this first charge? Say if after the loan was made in good faith and after appropriate due diligence which did not reveal issues with the borrowers background or property, the borrowers becomes the subject of an Unexplained Wealth Order or an order under the Proceeds of Crime Act (or indeed an order under any other Act), would these supersede the lender's first charge loan, and so the lender could then lose out or would the lender still have priority for the loan amount? Are there any other circumstances in which a lender holding a registered legal first charge would have to relinquish the first charge rights to someone else and so (potentially) lose out on the amount lent despite the current property value exceeding the loan amount? I think if the charge is properly registered you should be OK. But I suppose if the person who borrowed in some way doesn't have total right to the property it can be a problem, sometimes a wife has a right to half the property and if she hasn't given consent possibly only half of the property is covered. A few P2P loans have stumbled over a wife (possible wife, divorcing wife, etc) who claims a part or full share of a property.
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Post by rollercoaster on May 14, 2020 0:29:02 GMT
I wonder about the effect of covenants too. There is one p2p property I suspect has a buy back covenant if not developed. I think the charge is valid, but if the buy-back covenant is enforceable for less than the charge (loan) then p2p lenders would potentially lose out and need to chase the borrower for the shortfall from other assets.
I.e the charge has priority over the covenant, but the land is essentially worth less than the charge because of the covenant. So what is a lender to do? They could invoke the charge to force sale or repossess, but then have to sell as per the covenant because which other buyer would take on the risk?
Of course lender (platform) due diligence should have seen the covenant and managed the risk accordingly.
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