Lending Secured by Second Charges is Reportedly on the Rise

Lending secured by second charges is reportedly on the rise and has potential benefits for borrowers who want to raise additional capital without losing their existing deals.

A lender seeking a second charge must take extra steps to protect its position, and both borrowers and lenders must consider the following:

1. The existing lender's consent will almost certainly be required. This can take time to obtain and the process should be started early.
2. Both lenders need to agree the limit of the first lender's security (if any), and whether the lenders need to consult or seek consent before enforcing their charge.
3. These issues and the first lender's consent will usually be documented in a deed of priorities. The format of this will usually be dictated by the first lender. Negotiating this document can be time consuming and costly.
4. Due diligence on the property is important  for the second lender. With less 'headroom' in the value of the property, they are at greater risk from title or other legal issues that affect value.

Any borrower seeking a second charge should weigh the benefits against the likely higher cost and risk of delays.

Contact us

For advice in relation to lending secured by second charges, please contact Steven McGuigan in our Commercial Property Law Team on 0117 314 5442.