Q I moved in with my partner last year and would like to lend her money to refurbish the house (there is no mortgage on the property) so it can be sold. As it is a reasonably large sum, I would like some sort of security, but I am struggling to find out how to do this. I have been told I can put a charge on the property so it can’t be sold without me knowing and a promissory note for the amount.
However, the solicitors I have spoken to (and there have been many) have not been helpful and have informed me that a promissory note is not legally binding and there can’t be a charge on the property as there is no mortgage. They can’t offer me a solution so I don’t know what to do and it’s frustrating. I do not want interest to be paid on the loan but would like security. Could you please advise on how I can do this?
A If you want to find solicitors who are well-informed about legal charges – and also willing to help you – I suggest you do what I did and do an online search (I used Google) on “legal charge example”. Top of the search list was legalo.co.uk which bills itself as an “online legal resource for small businesses and individuals” and which provides downloadable templates for a wide variety of legal documents including one for drawing up a legal charge. The site also recommends drawing up a secured loan agreement to work alongside the legal charge.
An alternative option would be to approach Curzon Green Solicitors further down the search list which have a very clear explanation about legal charges and their uses. There’s no mention of promissory notes but it does say “a legal charge allows a lender [and it doesn’t have to be a bank or building society] to protect the money they have lent to an individual or company” so it seems that a legal charge is exactly the kind of security you are after.
A possibly more straightforward option – if your partner were to agree to it – would be for you to become joint owners of the house as tenants in common with your percentage share of the property being the percentage of its value that the money you are lending represents.