There needs to be focus on both the physical characteristics and the defined legal interest of a property when looking to use the property as security. Funders require a defined marketable interest and this isn’t always as easy as you might think.
Attention should be paid to the extent of the property as identified on the Land Registry plan and its accuracy. This is particularly important for redeveloped land where the title boundaries may not represent the "on the ground" boundaries of the newly developed properties. If the plans for the properties to be charged are not correct this can lead to delay in charging to ensure they are rectified at the Land Registry and, at worst, can lead to a charge over only part of a property making the security unenforceable.
Where you wish to charge part of a title, the Land Registry need to identify the part and this will be by reference to a plan. Again, it is key that this plan is accurate and Land Registry compliant otherwise it may lead to the application to register being rejected by the Land Registry.
If you are just charging part of a title, a funder will require us to advise on the need for a deed of cross rights. Deeds of cross rights are often more relevant on new developments where the roads and services may not yet be adopted. A Deed of Cross rights will deal with any rights and reservations in relation to the uncharged part of the land that may be required in the event that a funder enforced their security.
A funder will also require information on any shared access, parking or shared services and how this works in practice can be considered at a development stage as to how this would translate upon charging.
When considering a charge of part of a property you will need to think about the division of that property. Vertical for a terraced house and more complex layouts will have more considerations and can make things more complicated.
For example when dealing with a block of flats, you may consider it simpler at development stage to just take a lease of a whole building. However, when it comes to charging, funders prefer to have separate legal interests should they have to enforce their security and so from a charging perspective having individual leases within a block would provide greater flexibility on charging.
You can also consider separating a legal interest by granting a lease to a subsidiary perhaps or grant a lease to a subsidiary and then a leaseback of part of the building to the Registered Provider, in order to just charge part.
The costs and complexities of these arrangements at development stage need to be balanced with the advantages and flexibility that this may offer on charging.