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What is a First Charge?

A lender with a first legal charge over a property has a first call on any funds available from the sale of the property. 

A legal charge allows a lender to protect the money they have lent to an individual or company. It is a legal document signed by the borrower which is registered against the property at the Land Registry to alert any potential buyer of the existence of the debt.

A prime example is when you purchase a property using a mortgage. Your mortgage provider (bank) will hold a first charge over the asset you are buying. Should you default on your payments and be unable to continue making these payments the property will be sold in order to repay funds.

Providers looking to raise funds by way of a loan note tend to place first charges over the assets they are looking to purchase. This gives those invested clarity that the asset forms part of the collateral should any defaults take place.

A security trustee is usually appointed to confirm the legal charges on the companies asset in order to protect the interest of investors.

What is a First Charge?: Text
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