Legal Charge Document
- A legal charge over property
- Charge template drafted by a UK solicitor
- Clear plain English for easy understanding
- Full guidance notes for easy editing
- Average editing time of 15 minutes
How Does It Work?
- 1. Download
- 2. Edit
- 3. Print
- 4. Sign
Our Legal Charge document template is for use where a creditor is to take a form of security over the assets of a debtor. Use this charge where the security is either freehold or long-leasehold property. It is often referred to as a legal charge on property.
Drafted by our co-founding solicitor, David, he has written the template in clear plain English. A document template drafted for easy editing.
Included with the document download is a detailed guide to completing the template. You get the reliability of a document that a UK solicitor with twenty-five years of experience has drafted. Also you save on legal fees.
On average this template take about fifteen minutes to edit and complete. Offering you great value compare to hiring a lawyer to create the document for you.
The document template is downloadable in Word format. Once downloaded, please read the guide that comes with it and then edit the document template to create your final document. You edit the document just like you would complete a form. Simply fill in the blanks.
The document template guide also explains how you then register the legal charge with the land registry.
When to use a Legal Charge Document
The template is suitable for putting in place a charge against property. You do this by taking security over residential or commercial property which is either freehold or long leasehold.
If the property is leasehold you ideally want a “long leasehold” property. We mean property for which a significant premium was paid to purchase the lease or its remaining term. This ensures that the lease has value which becomes important if you need to exercise the security. Why? Well, because if you do have to enforce the legal charge you will then need to sell the property.
Any other types of lease will not be as good security as the lease will not have a resale value. You could find yourself taking over the burden of paying significant rent each year.
Legal Charge -v- Mortgage
People also call this sort of legal charge a mortgage. It works like a bank mortgage and ultimately gives the creditor the power to sell the property in question to recover the money owed. This happens if the debtor has defaulted for example in the repayment of a loan owed to the creditor.
This Legal Charge document template incorporates various options, so it is appropriate whether:
- that property is registered land at the Land Registry or unregistered land; or
- the debtor is a company or an individual.
This legal charge also works to secure a guarantor’s obligations, if needed.
In this template please treat references to the mortgagor or debtor as references to the guarantor if you are using the legal charge in this manner. Effectively the guarantor will be standing in the shoes of the original debtor to the extent of the guarantee. If you need a template for a guaranteed loan agreement, then Legalo has one available.
If as a lender you think you might need security for your loan at any point, it is best if you take it at the point that you make the loan. When it is taken later on, after the loan has been made, it can be held to be invalid if taken against a company. Specifically if the company goes bust, any legal charge that was put in place after the loan was entered into can be voided.
Legal Charge Documents and Loans
You may be using this legal charge in conjunction with one of our loan agreement templates, in which case, please use our Secured Loan Agreement template.
Register the charge once completed. This Government guide on registering charges takes you through the steps and links to the form that you will need.
Independent Legal Advice on Charges
If a person that is not the actual debtor (or by more than one person, where not all of them are the original debtor(s), e.g. a guarantor) is providing the charge, then the creditor has a duty to check that there is no “undue influence”.
In this regard, the creditor should ensure that (a) the person takes independent legal advice and (b) the legal adviser signs a letter to the creditor to certify that he or she has given such advice and is happy the legal charge is binding on the person and that they were not under the undue influence of anyone else when signing it.
Legalo has a template for the form of certificate required in this case.
This also applies where there is more than one owner of the property. For example, where one of the owners borrowed the loan or incurred the debt being secured.
Often this might be the wife of a businessman who is borrowing money for the benefit of his business. However, he is securing it on their joint house.
If you are a commercial landlord, then you may find our full range of commercial property document templates.
Clauses In Our Legal Charge Document
Below you will find an excerpt from the guide to this template. The guide will give you will have a good idea of what is covered by the legal charge document template. The full guide accompanies the template once bought and downloaded:
This clause defines the main terms used in the agreement.
- Charged Assets – If the mortgagor is a company, then this legal charge covers some additional assets, other than the property – see clause 2.1.2.
- Expenses – Naturally if the creditor has to enforce its security, it will charge the mortgagor for all its expenses in so doing.
- Interest – Fill in the percentage interest that applies if any payments due under this legal charge (such as expenses) are not paid on time.
- Mortgagor’s Obligations – This refers to the money owed by the mortgagor to the creditor and may include any future debts while the legal charge is still in place. If the legal charge is discharged/removed due to the mortgagor having cleared its debts in full to the creditor, then if security is needed again, a new legal charge will be required.
- Property – Fill in the address of the property being charged by this legal charge. If it is undeveloped land (e.g. a field) or otherwise not simply known by its postal address, then fill in a description of it in the case of registered land. This should match its description in the registered title. If it is registered at the Land Registry, then fill in its title number. For land not registered then delete the phrase in square brackets that refers to registration.
2. Legal Charge
This is the main clause in the legal charge document template. Under this clause the borrower grants a charge in favour of the creditor. You will see that, in the case of a company, we have presumed it is running a business from the property. At clause 2.1.2 we have made assets at the site in question subject to the charge. This is optional, and you can delete clause 2.1.2 in full – if doing so, then delete references to “the Charged Assets” (as well as its definition) throughout the agreement.
After grant, the charge needs to be suitably registered. For registered land, this means registering it at the Land Registry on form “CH1”. For unregistered land, this means registering a land charge at the Land Registry on form “K1”.
In the case of a mortgagor that is a UK company, it must also be registered at Companies House. Use form “MR01” to register the legal charge.
Deadlines and fees may apply for this. E.g. There is a requirement to register the legal charge within 21 days at Companies House. This is 21 days from the date of the legal charge. A fee of £13 is payable so be sure not to delay this or leave it to the last minute. If you miss the deadline, then you must apply to the court to register the charge. Applying to the court will be expensive and can be avoided by registering the charge in time. Forms for the registrations are available from Companies House and The Land Registry. If a company has granted the legal charge use this Register Legal Charge Form. To register the legal charge at the land Registry use the Land Registry Legal Charge Register form.
3. Repair, alteration and insurance
This clause requires the mortgagor to keep the property insured and in good repair, and not to alter it significantly.
4. Restrictions on charging, leasing or disposing or parting with possession
This clause imposes some restrictions on the mortgagor in dealing with the property and the charged assets. For example it should not charge the property to someone else or let it without the creditor’s permission.
5. Powers of the Creditor under the Charge
This clause adds some standard management powers in the event that the creditor needs to enforce this security. For example due to the mortgagor not having paid the loan, etc back on time.
After default by the mortgagor, a mortgagee (i.e. the creditor) will often enforce its security by appointing a “receiver”. The receiver will resolve matters, manage the property and get it ready for sale. This clause in the legal charge document sets out various standard powers the receiver will have. The mortgagor will have to pay the receiver’s charges.
7. Power of attorney under the Legal Charge
As part of the security, the creditor will hold a “power of attorney” over the mortgagor. This permits the creditor to sign documents or do various things on the mortgagor’s behalf.
If the borrower defaults then this clause in the legal charge may be need by the creditor. For example where as a result the mortgagor is not co-operating or responding to any communications from the creditor. This should reduce the creditor’s costs and reduce wasted time. In addition reducing the necessary charges for interest (for all of which the mortgagor is liable in any event).
8. Preservation of other security, rights and further assurance
Clause 8.1 covers multiple security situations. If the creditor has other security for the mortgagor’s debts the different forms of security do not cancel one another out. Clause 8.2 covers any co-operation needed from the mortgagor in getting the security registered (as noted above). (The power of attorney at clause 7 might also cover this.) Delete clause 8.3 if the mortgagor is not a company.
9. Interest under the Legal Charge Document
Interest is due on unpaid expenses of the creditor as noted above. This clause states that the lender will compound the interest, if the the creditor does not pay the interest regularly. Select from the options as to whether this should be monthly or quarterly. You then charge interest on interest.
That’s it. You now know all about our legal charge document template. As you can see it is a simple document to put in place. Made much easier with our template document and accompanying guide.