Will this 'loan' save our property sale?

Our lawyer, Fiona McNulty, advises a seller on the legal issues relating to 'loaning' a buyer money to confirm a property sale
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Loan cartoon
© Merrily Harpur
Question: We are selling our property and our cash buyers are now £350,000 short of money. We do not want the sale to fall through and so the agents have suggested we lend the money to the buyer - we have never heard of anything like this. What do you think?

Answer: Assuming that the property you are selling is worth more than £350,000 so there will be a reasonable amount of equity available, you could “lend” the buyers the money they need but you must ensure that your position is secure.

In practice, the buyers will pay you less for the property on completion and you will take a charge over the property as security for the amount of the shortfall. The Charge should be registered at the Land Registry at the same time that the buyers’ title is registered.

The charge should deal with such matters as the level of interest you wish to charge the buyers, whether it will be paid monthly or rolled up until the loan is repaid in full, and when the loan is to be repaid - there must be a fixed date otherwise you may not be repaid until the buyers sell the property.

There should be covenants in the Charge requiring the buyers to adequately insure the property, maintain it etc. Clearly it is essential that the Charge is well-drafted to protect you, so inform your solicitor of your plans as soon
as possible.

What's your problem?

If you have a question for Fiona McNulty, email legalsolutions@standard.co.uk. We regret that questions cannot be answered individually.

Fiona is a partner in the property team at Thring Townsend Lee & Pembertons Solicitors www.ttuk.com.

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