What is a Third Party Legal Charge?
What is a third party mortgage?
A third-party legal mortgage or third-party legal charge is a type of loan, secured on a property. It grants a mortgage or a legal charge over a property (in favour of a lender), with the property serving as security for a specific loan. That loan is being given to someone other than the owner of the property.
For example: In a director's personal guarantee, the director of a company secures a mortgage or legal charge over their own property, where the loan is being given to the company. If the company forfeit on the loan or mortgage, then the director is at risk of bankruptcy and the director's property may be at risk of repossession.*
A third party charge on a property is therefore seen in the eyes of the law as being risky for the person granting the security over their property. As a result, lenders require individuals who are agreeing to a third-party charge over their property, to receive independent legal advice from a solicitor.
The Lender requires a solicitor to grant a certificate where the solicitor confirms that they have explained the risks of the transaction to the individual granting the third-party legal charge and that that individual appears to be willing to enter into third-party charge without any influence or pressure from any third-party.
The process of obtaining independent legal advice is therefore as much for the lenders benefit as it is for the individuals benefit.
As the charge is granting an interest over property, special rules apply to the documentation.
The charge has to be granted and executed by way of a deed and the deed has certain formalities around signature and witnessing.
While Parachute Law can provide independent legal advice over a third-party charge, the solicitor will not be able to witness your signature on the third-party charge during the video call because that type of witnessing will leave the document improperly executed. In other words, charge will not be valid.
Provided your lender is happy for a third-party to witness your signature on a third-party charge, Parachute Law are very happy to provide independent legal advice on the third-party charge. Because we provide our independent legal advice remotely, we also do not handle original passport documents and will not provide a certificate requiring us to have personally inspected your ID documents.
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Frequently Asked Questions
If you're making a director's guarantee, getting an indirect mortgage or a proprietor non-borrower mortgage, you must have independent legal advice on the mortgage offer and terms related to the property being purchased or refinanced. In some cases there'll also be a Third Party Charge registered over your own residential home and you will need separate independent legal advice on this. We charge an additional fee for the supplemental legal advice for a Third Party Charge on your own home
This is another term which means the same thing. It is called a third party security because the owner of the property is not receiving the funds, they are providing security for the third party to receive the funds.
The deed of charge is the name for the document itself, securing the third party legal charge over the property.
There is no legal requirement for a solicitor to witness a signature upon the third party legal charge. This can be signed in the presence of an independent third party (a person over the age of 18 years old who is not related to any person named in the transaction).
Your lender must be willing to accept a third-party witness. If not, you will need to use a solicitor who can witness your signature of the deed in person. We can recommend a trusted alternative to ourselves if this is the case.
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If you're securing a third party legal charge, we can provide independent, impartial legal advice to make sure you know what you're agreeing to and help you to catch any nasty surprises in your agreement before it is too late.
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