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  • Buy-to-Let

    Charge on title deed

    hi all,

    I am going to bid on a property at auction this week. It is freehold property with full title guarantee. I have been through the legal pack and all seems fine. But there are 2 charges listed on the title deed. The first is dated 1988 and is called "registered Charge to secure the moneys" for when it was bought under right-to-buy and the second is dated 06/12/2007 from Bank of Scotland.

    As I understand it, these charges are loans, likely mortgages taken out on the property. From what I have read, they need to be discharged by the seller by paying them with the proceeds of the sale of the property, and paid in the order listed on the title. Am I right?

    Is there any way that I as the buyer could be liable to pay these charges? There is nothing else in the legal pack that says how much they are etc.

    Thanks in advance,

    Mat

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    If a charge is on the property and the owner has taken out a loan , the loan company will not discharge the loan until it is repaid.- this is their security against the loan.  This would obviously come form the sale of the property or other means.. However you should only buy the property with full title unencumbered . The right to buy scheme had various rules attached but in view of the time i expect this is long gone, and anyway its nothing to do with you only the  owner at that time.

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    Hi, the right to buy charge is with regard to the person who purchased it under the right to buy scheme. It secures the repayment of the discount within a certain amount of time. It is likely expired and will be automatically removed on sale. It is not quite right that it would have nothing to do with you and only the owner at the time, as it is a charge secured on the property eg. it is attached to the property and not the people personally although action could be taken against them as well. In any event, it is likely long expired as the repayment of the discount is usually for up to 5 or 10 years after purchase under the right to buy. However, the 2007 entry is likely to be a mortgage and if not repaid on completion will remain on the title to the property and would become your responsibility. The auction contract and any accompanying special conditions should provide for the repayment of financial charges on the title.

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    Many thanks, Both.  have re-checked the contract and the rest of the legal pack, and there is no mention of the charge.

    So if I read this right, if the seller cannot repay the charge to bank of Scotland from the proceeds of the sale, then the charge remains on the title and becomes my responsibility.

    The contract does say that it is being sold with full title guarantee, which I think means it is free from these charges. I think this may be one to send my solicitor. Thanks again for your help.

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     if not repaid on completion will remain on the title to the property and would become your responsibility 

    Is that true?   I'm not looking for an argument, I am just surprised that an individual can become responsible for a loan which he or she has not signed for or had the benefit of.  I appreciate that not discharging the debt would still  leave the lender having first charge on the property,  But I would be surprised if the new owner became liable for the debt.  I would expect the new owners' solicitor to advise him not to complete the sale without it being debt free. I have always got my solicitor to do the grunt work in the days before the auction.  I certainly wouldn't be making a bid without that assurance from my own solicitor - in writing.



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    Hi Bob,

    Sorry, I should have been clearer. You are correct in that it will not become your responsibility. But as the charge remains on the property, you will buy it (if you complete) subject to the mortgage. Therefore, the mortgage lender can still take action and claim possession of the property and sell it to realise the capital and take their debt plus costs. As you would have bought the property with notice of the charge, whilst they cannot force you to pay it per se, they can still take the property and take it from the proceeds of sale, therefore you still end up paying it. But as you say, no one would usually complete unless the mortgage has been paid. However, it is all usually done on undertakings and so you will not usually know that the mortgage has not been repaid until after you have completed. The mortgage is not repaid prior to completion as the seller usually needs the proceeds of sale to repay the mortgage.

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    Sorry yes, re: full title guarantee includes a covenant that the property is being sold free from financial charges and other things. I neglected to include this in my earlier reply. On the face of it you should be fine. See if there are any replies to requisitions in the legal pack; this usually includes an undertaking from the sellers' solicitors to repay the mortgage on completion.

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