Mortgages | By Lawyers
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Mortgages

This publication guides practitioners through the preparation of loan agreements, mortgages, and guarantees.

1 Matter Plan

Overview

The commentary covers the drafting and execution of loan, charge, variation, and assignment deeds, and completion, registration, discharge, default, and repossession when acting for the borrower or lender.

The Reference materials folder includes guidance on electronic signing and witnessing, and the comprehensive Getting the matter underway folder includes compliance and client care documents. Using the extensive Retainer Instructions when gathering information ensures nothing is missed.

Precedents in this publication include:

  • loan agreements for:
    • no security;
    • draft mortgages;
    • linked mortgages;
  • lender's requisitions;
  • a Deed of Forgiveness of Debt;
  • a Default Notice under s 103 of the Law of Property Act 1925.
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1 Matter Plan Included

  • Item icon ALERTS - Nil
  • Item icon Full Commentary - Mortgages
  • Folder icon Reference materials
    • Item icon Electronic Signing and Witnessing
    • Item icon Looking to the Future
  • Item icon Overview
    A mortgage is an instrument creating a legal or equitable charge over land by which a loan is secured. The charge will remain until the security property is sold, when the loan is repaid out of the sale proceeds, or when it is repaid during or at the end of the loan term.

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  • Item icon Summary of the process
    Mortgage The usual steps in acting for the borrower on a mortgage are:

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  • Folder icon A. Getting the matter underway
    • Item icon File cover sheet - Mortgages
    • Item icon To do list - Mortgages
    • Item icon First steps
    • Item icon Retainer instructions - Mortgages
    • Folder icon Compliance documents
      • Item icon Client Due Diligence and Anti-money Laundering Guidance
      • Item icon Client Details, Identity Verification and Source of Funds
      • Item icon Conflict of interest check
      • Item icon Client and matter risk assessment
      • Folder icon If required - Reporting an issue
        • Item icon Anti-money laundering internal disclosure
    • Item icon Letter to client enclosing cost quotation for mortgage
    • Item icon Initial letter to borrower client enclosing Client Care and Terms of Business - Mortgages
    • Folder icon Enclosures for initial letter to borrower client
      • Item icon Client care information
      • Item icon Terms of business
      • Item icon Scope of work - Mortgages
      • Item icon Enclosure - Summary of the mortgage offer
      • Item icon Enclosure - Mortgage general explanation for borrowers
      • Item icon Enclosure - Mortgage questionnaire
      • Item icon Verifying identity and source of funds
      • Item icon Client identification safe harbour standard
        The safe harbour standard, when followed, is regarded by HM Land Registry as a discharge of the practitioner’s duty to verify the identity of a party to a registrable transaction. Schedule 8 of the Land Registration Act 2002 provides that compensation is payable in the event of a mistake on ...

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      • Item icon Client Details, Identity Verification and Source of Funds
    • Item icon Initial letter to lender client enclosing Client Care and Terms of Business - Mortgages
    • Folder icon Enclosures for initial letter to lender client
      • Item icon Enclosure - Summary of the mortgage offer
      • Item icon Client Details, Identity Verification and Source of Funds
    • Item icon Time and costs estimates
    • Folder icon If required - Letter to client varying the Client Care and Terms of Business
      • Item icon Letter to client varying the Client Care and Terms of Business
    • Folder icon General deeds, agreements, statements, declarations, consents, and execution clauses
      • Item icon Deeds and agreements
      • Folder icon Deeds
        • Item icon Deed for general use
        • Item icon Deed of assignment of agreement
        • Item icon Deed of assignment of agreement with consent
        • Item icon Deed of assignment of an insurance policy
        • Item icon Deed of assignment of equitable interest in residential land
        • Item icon Deed of gift
        • Item icon Deed of guarantee
        • Item icon Deed of release
        • Item icon Deed of release and grant
        • Item icon General deed of indemnity
        • Folder icon Library of standard clauses for deeds
          • Item icon Amendment
          • Item icon Confidentiality
          • Item icon Confidentiality - Extensive
          • Item icon Costs
          • Item icon Counterparts
          • Item icon Dispute resolution
          • Item icon Events beyond control
          • Item icon Governing law and jurisdiction
          • Item icon Interpretation
          • Item icon No assignment
          • Item icon Notices
          • Item icon Severance
          • Item icon Third parties
          • Item icon Waiver
          • Item icon Whole agreement
      • Folder icon Agreements
        • Item icon Agreement for general use
        • Item icon Boundary agreement
        • Item icon Confidentiality agreement
        • Item icon Construction agreement
        • Item icon Heads of agreement
        • Folder icon Library of standard clauses for agreements
          • Item icon Amendment
          • Item icon Confidentiality
          • Item icon Confidentiality - Extensive
          • Item icon Costs
          • Item icon Counterparts
          • Item icon Dispute resolution
          • Item icon Events beyond control
          • Item icon Governing law and jurisdiction
          • Item icon Interpretation
          • Item icon No assignment
          • Item icon Notices
          • Item icon Severance
          • Item icon Third parties
          • Item icon Waiver
          • Item icon Whole agreement
      • Folder icon Statements and declarations
        • Item icon Statement of truth
        • Item icon Statement of truth - High Court
        • Item icon Statutory declaration
        • Item icon Statutory declaration of solvency
        • Item icon Affidavit - General
        • Item icon Exhibit sheet for affidavits - General
        • Item icon Witness statement - Family matters
        • Item icon Exhibit sheet to witness statement - Family matters
        • Item icon Witness statement - Civil matters
        • Item icon Exhibit sheet to witness statement - Civil matters
      • Folder icon Execution clauses
        • Item icon Execution clauses - Agreements and contracts
        • Item icon Execution clauses - Deeds
        • Item icon Execution clauses - Overseas companies
      • Folder icon Consents
        • Folder icon If required - Personal data consent - General
          • Item icon Letter to client enclosing consent - General
          • Item icon Letter to third party enclosing consent - General
          • Item icon General letter enclosing client consent
          • Item icon General letter enclosing third party consent
          • Item icon Consent to provide information - General
          • Item icon Consent to provide information - General - Third party
        • Folder icon If required - Personal data consent - Health professional
          • Item icon Letter to client enclosing consent - Health professional
          • Item icon Letter to third party enclosing consent - Health professional
          • Item icon Letter to doctor enclosing client consent
          • Item icon Letter to doctor enclosing third party consent
          • Item icon Consent to provide information - Health professional
          • Item icon Consent to provide information - Health professional - Third party
        • Folder icon Change of name
          • Item icon Change of name deed for an adult - Concise
          • Item icon Change of name deed for a minor - Concise
          • Folder icon If required - Enrolment by an adult
            • Item icon Change of name deed for an adult - For enrolment
            • Item icon Statutory declaration - Enrolment of adult change of name deed
            • Item icon Notice for the London Gazette on the change of name of an adult
            • Item icon Consent to enrolment of change of name of an adult
          • Folder icon If required - Enrolment by a minor
            • Item icon Change of name deed for a minor - For enrolment
            • Item icon Statutory declaration - Enrolment of minor change of name deed
            • Item icon Affidavit of best interest for the change of name of a minor
            • Item icon Consent to enrolment of change of name of a minor
  • Folder icon B. The security property, mortgage and parties
    • Item icon The security property
      Identification Those who cannot imagine a mistake in this area easily overlook the need to identify the security property correctly.

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    • Item icon Searches
      Charging clients for searches Following the case of Brabners LLP v Revenue and Customs (VAT - SUPPLY: Single or multiple) [2017] UKFTT 666 (TC), the supply of searches to clients has been deemed part of the practitioners’ legal services and not a disbursement. The tax position is unclear, but ...

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    • Item icon Form of mortgage charge
      A legal mortgage is created by deed: s 52 Law of Property Act 1925. For high street lending, the contractual relationship is embodied in the mortgage deed, loan offer and accompanying documentation.

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    • Item icon Mortgage conditions
      A precedent is available from The City of London Law Society for the purchaser’s practitioner to provide undertakings to the practitioner acting for the lender. Conditions within the legal charge document, loan agreement, or accompanying documentation can relate to items such as building insurance, ...

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    • Item icon Limited interest
      A registered title mortgage creates a limited security interest in the land. It does not convey ownership of the land to the mortgagee, which would be the case with a mortgage on an unregistered title.

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    • Item icon Remortgage of existing property
      The information required to give a clear certificate of title to the lender is much the same on a remortgage as it is for a new mortgage. One key difference for a remortgage is that the lender will often accept search indemnity insurance rather than requiring a local search of the property to be ...

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    • Item icon Second mortgages
      There may be several mortgages secured against a property. However, any lender will need to be satisfied that the borrower still retains enough equity in the property to support another mortgage or is prepared to take another mortgage irrespective of equity. Where a mortgage exists and is ...

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    • Item icon Bridging loans
      These are typically short-term loans used to finance a property purchase. There is a gap between the completion of the purchase and funds available, for example, from a property sale. The terms and interest payable will be less favourable than a standard mortgage. The conditions to be adhered to ...

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    • Item icon Buy to let mortgages
    • Item icon Equity release mortgages
      Borrowers who wish to mortgage their property but are over the age limit with standard lenders can take out an equity release mortgage. These operate in the same way as other types of legal charge, but the repayment terms are different. Usually, there are no repayments during the borrower's ...

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    • Item icon Islamic mortgages
      In Islamic Sharia Law, it is forbidden to borrow or lend money on terms which attract interest. Therefore, Islamic or halal mortgages are house purchase arrangements that comply with Sharia Law. The bank purchases the property and either grants a lease to the buyer or sells the freehold to them. ...

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    • Item icon Equitable mortgages
      Broadly there are three types of equitable mortgage:

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    • Item icon Mortgages to companies
      If the borrower is a company, the charge must be registered at Companies House within 21 days of its creation using a Particulars of charge, form MR01. This can be done online, and a fee is payable: see Registering a charge (mortgage) for a company. If the 21-day deadline is missed, an order ...

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    • Item icon Institutional lenders
      UK Finance UK Finance is a trade association representing the banking and finance industry in the UK.

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    • Item icon UK Finance Mortgage Lenders' Handbook For Conveyancers
    • Item icon Occupiers
      An adult occupier is anyone over the age of 17, including children of the borrower. By law, any adult occupier may have rights of occupation. Therefore, the borrower is required to advise the lender of any adult occupiers in the property.

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    • Item icon Guarantors
      A mortgage lender may require a guarantor as a condition of the mortgage. This is to spread the risk of non-payment to another party deemed creditworthy. If the mortgage offer requires the participation of a guarantor, a lender will require the guarantor to seek independent legal advice. This is ...

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    • Folder icon If required - Private mortgage
      • Item icon Private lenders
        Private loans are often made between friends or family members. Where both parties consent to the same firm acting for them, the files are best handled by different personnel to ensure compliance with regulatory requirements. Both parties must seek separate representation if any conflict of ...

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      • Item icon No security loan agreement
      • Item icon Mortgage linked loan agreement
      • Item icon Legal charge of a registered estate
      • Item icon Continuation sheet with standard terms of charge
    • Folder icon Library of common HM Land Registry forms
      • Item icon Application for an official search
      • Item icon Application for approval of a deed of variation/priority/postponement of a charge
      • Item icon Application for cancellation of an entry in the register on proof of discharge
      • Item icon Application for the rectification of an entry in the register
      • Item icon Application to cancel a restriction
      • Item icon Application to enter a restriction
      • Item icon Application to cancel entries relating to a registered charge
      • Item icon Cancellation of entries relating to a registered charge
      • Item icon Entry of a note of consolidation of charges
      • Item icon Continuation sheet for use with application and disposition forms
      • Item icon Application for first registration
      • Item icon Application to enter an obligation to make further advances
      • Item icon Application to note agreed maximum amount of security
      • Item icon Release of part of the land from a registered charge
      • Item icon Application for official search without priority of the land in a registered title
      • Item icon Application to cancel entries relating to a registered charge (or which an END has been sent)
      • Item icon Application for approval of a standard form of charge deed and allocation of official HM Land Registry reference
      • Item icon Application for noting the overriding priority of a statutory charge
      • Item icon Application to withdraw a restriction
  • Folder icon C. Acting for the lender
    • Item icon UK Finance Mortgage Lenders' Handbook For Conveyancers
    • Item icon Letter to borrower’s solicitor when acting for institutional lender
    • Item icon Electronic mortgage applications
      Primarily created for remortgages, the HM Land Registry’s free mortgage deed service allows digital mortgage applications to instantly update the title register without review by a caseworker. Known as the Sign your mortgage deed service, it enables a lender and practitioner to create a digital ...

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    • Item icon Letter to borrower’s solicitor when acting for private lender
    • Folder icon Enclosures for private mortgage
      • Item icon Statutory declaration on incidents of title
      • Item icon Authority to complete documents and satisfy requisitions
      • Item icon Lender’s requisitions
      • Item icon Payment directions
      • Item icon Certificate of title
      • Item icon Occupier’s consent
  • Folder icon D. Acting for the borrower
    • Item icon UK Finance Mortgage Lenders' Handbook For Conveyancers
    • Item icon Letter to client acknowledging instructions
    • Item icon Letter to new lender requesting loan documents
    • Item icon Letter to freeholder for insurance, ground rent and service charge information
    • Item icon Letter to management company for management pack
    • Item icon Letter to client sending summary of the mortgage offer
    • Item icon Enclosure - Summary of the mortgage offer
    • Item icon Letter to client with mortgage documents for signing
    • Item icon Letter to client to make appointment to sign mortgage documents
    • Item icon Letter to new lender’s solicitor returning signed institutional loan documents
    • Item icon Letter to new lender’s solicitor returning signed private mortgage loan documents
  • Folder icon E. Discharge of existing mortgage
    • Item icon Discharge of mortgage
      Once the principal or secured sum has been repaid, a discharge of the mortgage can be obtained from the lender. The lender usually discharges the mortgage electronically directly with the Land Registry in a process known colloquially as EDS1. There is no form EDS1, and no action by the practitioner ...

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    • Item icon Letter to client sending authority for lender to provide information
    • Item icon Authority to lender
    • Item icon Letter to current lender requesting title deeds and mortgage balance
    • Item icon Letter to current lender for redemption statement
    • Item icon Letter to client sending redemption statement
    • Item icon Letter to client with documents for signing and return
    • Item icon Cancellation of entries relating to a registered charge
    • Item icon Application to cancel entries relating to a registered charge
    • Item icon Application to cancel entries relating to a registered charge (or which an END has been sent)
    • Item icon Release of part of the land from a registered charge
    • Item icon Deed of forgiveness of debt
  • Folder icon F. If required - Independent legal advice, priorities, assignment and variation
    • Folder icon Independent legal advice
      • Item icon Guarantors
        A mortgage lender may require a guarantor as a condition of the mortgage. This is to spread the risk of non-payment to another party deemed creditworthy. If the mortgage offer requires the participation of a guarantor, a lender will require the guarantor to seek independent legal advice. This is ...

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      • Item icon Occupiers
        An adult occupier is anyone over the age of 17, including children of the borrower. By law, any adult occupier may have rights of occupation. Therefore, the borrower is required to advise the lender of any adult occupiers in the property.

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      • Item icon Occupier’s consent and deed of postponement
      • Item icon Acknowledgement of legal advice by proposed borrower
      • Item icon Consent to same solicitor legal advice
    • Folder icon Priorities
      • Item icon Variation of priority
        Priority is based on the time of lodgement for registration. The first mortgage to be registered will take priority over subsequent mortgages. However, the parties may agree to vary the order of priority by postponing the interests of the first lender behind those of the second or subsequent ...

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      • Item icon Deed of priority
    • Folder icon Assignment
      • Item icon Assignment of mortgage
        A lender may want to sell outstanding loans to another lender to liquidate assets into cash to lend to new borrowers or invest elsewhere. A mortgage is a contract and therefore is assignable.

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      • Item icon Notice of assignment of simple debt
      • Item icon Deed of assignment of debt - Concise
      • Item icon Deed of assignment of debt - Extensive
      • Item icon Letter to client with documents for signing and return
    • Folder icon Variation
      • Item icon Porting of mortgage
        A new mortgage offer is usually required where an existing lender agrees to the borrower moving, or ‘porting’, the loan security from one property to another. The practical effect of porting a mortgage is the discharge of the old mortgage and the uptake of a new mortgage on the same terms. Usually, ...

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      • Item icon Variation of mortgage
        The terms of a mortgage may be varied, and the variation may be registered by way of a deed of variation. Some mortgages also provide that the original mortgage covers further advances by the lender without any variation.

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      • Item icon Application to change the register
      • Item icon Deed of variation of mortgage
      • Item icon Deed of substituted security
      • Item icon Application to enter an obligation to make further advances
      • Item icon Application to note agreed maximum amount of security
      • Item icon Application to enter a restriction
      • Item icon Application to cancel a restriction
      • Item icon Application to withdraw a restriction
      • Item icon Letter to client with documents for signing and return
  • Folder icon G. Default
    • Item icon Default
      Default is the failure by the borrower to perform or observe obligations, known as covenants, contained in the mortgage. The most common default occurs when the borrower fails to make the loan repayments, resulting in arrears and interest accruing.

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    • Item icon Default notice section 103 of the Law of Property Act 1925
    • Item icon Obtaining possession
      Pre-action protocol There is a pre-action procedure protocol applicable to residential property, which the lender must adopt before exercising any rights the lender may have to take possession, sell or foreclose.

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    • Item icon Letter to borrower with notice under section 103 Law of Property Act 1925
    • Item icon Transfer of part of registered title(s) under Power of sale
    • Item icon Transfer of whole of registered title(s) under Power of sale
    • Item icon Foreclosure
      An alternative to exercising a power of sale is foreclosure. The key difference is that a power of sale gives the lender the right to take possession and sell the property to recoup the money owing under their mortgage and pay the balance back to the borrower. In contrast, on foreclosure, the ...

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  • Folder icon H. Completion
    • Item icon Immediately before completion
      Pre-completion searches

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    • Item icon Documents to be held on completion
      Ensure before completion that the signed legal charge and any other documentation the lender requires are held, together with the discharge of any existing mortgage or appropriate undertakings. If the mortgage is part of wider legal work, retain documents relating to those transactions in ...

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    • Item icon Date and time for completion
      If acting on a purchase, this is agreed between the seller and the buyer when exchange of contracts occurs. The buyer’s practitioner will usually act for both the buyer and the lender and owe a professional duty of care. Pre-completion actions are carried out on their behalf to protect both their ...

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    • Item icon Letter to new lender regarding completion date and sending certificate of title
    • Item icon Letter to client regarding completion date
    • Item icon Payment at completion
      Before completion, a completion statement is prepared by the seller’s practitioner, which sets out the movement of funds for approval by the parties and reconfirmation of account details for the transfer of the funds. The buyer’s practitioner will send the lender’s prescribed, completed, and signed ...

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    • Item icon Completion Statement
    • Item icon Letter to client sending completion statement and requesting payment details
    • Item icon Letter to current lender confirming repayment and requesting discharge
  • Folder icon I. Registration
    • Item icon Registration
      Registration of the legal charge is carried out by sending a form AP1 Application to Change the Register to the Land Registry with a certified copy of the mortgage deed. The fee is calculated in accordance with HM Land Registry’s Scale 2. If the property purchase was subject to a mortgage, then all ...

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    • Item icon Application to change the register
    • Item icon Letter to Land Registry with DS1 for registration
    • Item icon Particulars of a charge
    • Folder icon If required - Deadline missed for registration of company mortgage
      • Item icon Claim form (CPR Part 8) (Appendix A, B and C)
      • Item icon Example content - Witness statement - Company director
  • Folder icon J. Finalising the matter
    • Item icon Documents following registration
      Lenders rarely require documents following completion and registration, but their instructions should be checked for clarification. Usually, a copy of the Land Registry title information document and a copy of the new mortgage deed will suffice, along with any occupiers consent form or additional ...

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    • Item icon Letter to borrower client confirming completion
    • Item icon Letter to new lender client confirming completion
    • Folder icon If required - Following registration
      • Item icon Letter to client sending copy of title information document
      • Item icon Letter to new lender client confirming registration effected
    • Item icon Example invoice
    • Item icon Invoice recital - Mortgages
    • Item icon Enclosure - Explaining the bill
    • Item icon Closing the file
    • Item icon File closing checklist
    • Item icon File review form - General
  • Item icon Further information
  • Item icon Comments and suggestions for By Lawyers

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