Difference between first and second charge

I dont think a lot of this is correct. For a start it is more likely to be a receiver that is appointed than administrators under a fixed charge and they are an agent of the borrower so would be required to achieve a fair sale price. Therefore while they are likely to be appointed by the first charge holder, they would have some regard for the second charge holder by default, they wouldnt just sell the security at any price.

In the case of admiinistration, there are priorities of recovery, their charges are first but all fixed charges, first & second, rank ahead of staff and certainly ahead of HMRC who are an unsecured creditor.

I would say that the answer to the question is that the administrators/recievers would decide if the price was resonable and then recommend to the first charge holder to accept. The second charge holder would indeed have to accept a loss.

Now dualinvestor can give a professional opinion and tell me how wrong I am.

Edit It should be pointed out that first charge loans with a second charge are also potentially dangerous as the second charge holder could default the loan even if the first charge loan wasnt in arrears. The first charge holder would be able to appoint the receiver but the loan would still be in recovery and out of the lenders control

Many thanks!
Could you please give short definition of administrator and receiver?

Everything ilmoro saysin his first post on this thread is correct, however there is a small possibility that the first charge holder will not use a insolvency procedure, administration, receivership or liquidation, at all.  They could sell as mortagee in possession, if so should they sell at undervalue there is no process to overturn the sale unless the purchaser had colluded.  The only remedy in that case would be to sue the first charge holder in which case the first hurdle would be to establish that the best price had not been achieved in the circumstances but in the absence of such a challenge there is little or nothing subsequent chargeholders, other creditors or the debtor themselves can do about it.

Thanks. One query if a first charge holder initiates proceedings to become mortgagee in posession can the second charge holder appoint a receiver/administrator to preempt this and possibly improve their position. The first charge holder would probably appoint their own receiver instead but it would put the process under an 'independent' party not the first charge holder.

Thanks to ilmoro for the link

Does anyone have any more further reading links?


Also, do I remember correctly, did AB put in place a clause that restricted the sale price in one of their loans due to it being  2nd charge? 

Almost impossible. It is unlikely that a second charge would be able to force a sale as the first charge holder has the right to appoint a reciever of their choosing and almost certainly would. The first charge holder would still have to release their charge if they refused to do so the second charge receiver would probably resign and they would be back to stage one plus a load of extra costs to be covered (I assume after the first charge had been met). Pretty unlikely that the first charge holder wouldnt also have a floating charge covering business assets

www.bridgingandcommercial.co.uk/article-desc-2841_ask-the-rece