What is a legal charge?
A legal charge is the form of mortgage used in England and Wales to secure a loan on land or buildings. Under section 87 of the Law of Property Act 1925 a "charge by way of legal mortgage" gives the lender the same protection, powers and remedies as if it held a long lease of the property, without the property actually being transferred to it. The owner stays the owner and keeps using the building; the lender gets the right, if the loan is not repaid, to take possession and sell.
On a commercial mortgage, a bridging loan or a secured business loan against premises, the legal charge is the central security document. It is registered against the title at HM Land Registry and, where the borrower is a company, at Companies House as well. Think carefully before borrowing. Property or other assets offered as security may be at risk if you cannot keep up repayments.
What the charge gives the lender
Three things. A right of possession and sale if the borrower defaults: the power of sale in section 101 of the Law of Property Act 1925 arises once the mortgage money is due, and the lender can sell the property and apply the proceeds to the debt. Priority over later creditors in the proceeds of that property. And control over dealings: the charge normally forbids the borrower from selling, letting or further charging the property without the lender’s consent, and a registered charge means a buyer or a later lender cannot take the property free of it.
The lender does not own the property and does not manage it. Day to day, a charged building is run exactly as an uncharged one, and the covenants in the charge (to insure, to repair, to pay the rates, not to alter the use) are the lender’s way of protecting the value of its security.
First charge and second charge
Charges over the same property rank in the order they are registered. The first legal charge is paid first out of a sale; a second charge is paid only from what is left. A second-charge lender therefore lends against the equity above the first mortgage, prices the extra risk, and usually needs the first lender’s consent where the first charge forbids further charges. A company that owns its premises with a bank mortgage on them and wants to raise more against the same building is looking at a second charge, or at refinancing the whole amount with one lender on a new first charge.
How a legal charge is registered
Registered land. The charge is a registrable disposition under section 27 of the Land Registration Act 2002, and it takes effect as a legal charge only once it is entered in the charges register of the title. The lender’s solicitor applies to HM Land Registry after completion, and the entry shows the date, the lender and any restriction on dealings.
A company borrower. A charge created by a company is also registered at Companies House within 21 days under Part 25 of the Companies Act 2006, so that anyone reading the company’s file can see the property is charged. Both registrations are routine and are handled by the lender’s solicitors; the loan is normally drawn once the lender is satisfied the registrations will go through.
A legal charge is not a debenture
A legal charge is security over one property. A debenture is security over a company’s assets as a whole, through fixed and floating charges. A property-owning trading company that borrows on its building commonly grants both: the legal charge over the building and a debenture over the business. The debenture answer explains the second document.
How a legal charge ends
When the loan is repaid the lender gives a discharge, which the solicitor sends to HM Land Registry to remove the entry from the charges register, and files a statement of satisfaction at Companies House where the borrower is a company. Until the discharge is registered the property remains charged on the record, which is why a sale or a refinance is completed by the outgoing lender being paid from the proceeds and releasing the charge on the same day.
Where a legal charge appears in business finance
A commercial mortgage secured on the premises a company trades from or lets; a bridging loan secured on a property for a short term until a sale or a refinance; a secured business loan where the company offers its building as security for borrowing that has nothing to do with the property; and development finance, where the charge is over the site and the lender releases money in stages against the build. A mortgage on a property the borrower or a family member lives in is a regulated mortgage contract, which we do not arrange.
For property-secured lending we work with UK limited companies and LLPs only, for business and commercial purposes. Enquiring does not affect your credit score. If you apply to a lender, it runs its own credit search, which may be recorded on your file.
Frequently asked questions
Is a legal charge the same as a mortgage?
In England and Wales, yes in effect: since the Law of Property Act 1925 the charge by way of legal mortgage is the way a mortgage of land is created, and the words are used interchangeably. Scotland uses a standard security under its own law.
Can a lender take a legal charge over a leasehold property?
Yes, over the lease, provided the lease allows it and has enough term left to satisfy the lender. The lease, the landlord’s consent where the lease requires it and the unexpired term are read as part of the valuation.
What is an equitable charge?
A charge that has not been completed as a legal charge, for example because it was not registered as one or was created by an agreement to charge rather than a deed. It gives the lender rights against the borrower but weaker protection against third parties, which is why lenders take a legal charge wherever they can.
Can the directors’ own home be charged?
A charge over a director’s home to support a personal guarantee is a separate step with its own legal advice requirement, and where the property is the director’s residence the lending can fall within the regulated mortgage rules. We do not arrange regulated mortgage contracts.
Is CapExpand regulated?
CapExpand Ltd (FRN 1060885) is a credit broker and an Appointed Representative of White Rose Finance Group Limited (FRN 630772), which is directly authorised and regulated by the Financial Conduct Authority. We are a broker, not a lender. We work with UK limited companies and LLPs only, for business and commercial purposes. If you have a complaint, our complaints page explains how it is handled. We do not arrange regulated mortgage contracts, including properties for your own use.
How is CapExpand paid?
We will receive commission from lenders. On some cases we also charge a fee, which we set out in writing and agree with you before you proceed.
More funding questions answered
- How does a bridging loan work?Short-term borrowing secured on property, repaid in one sum from an exit; how the interest is retained, rolled up or serviced.
- How to get a bridging loanSix steps, exit first: the property and loan-to-value, the criteria check, the valuation and offer, the legal work and completion.
- What is an unsecured business loan?A fixed sum lent to a company without a charge over any asset, on its accounts and bank statements, and almost always with a personal guarantee.
- What is a floating charge?Security over a changing class of assets such as stock and book debts, which crystallises into a fixed charge on a default; how it differs from a fixed charge and what it is worth on insolvency.
- What is a decision in principle?A lender’s indication, on the papers and before a valuation or full underwriting, that it would lend a stated amount on stated terms; what it is worth and how it becomes an offer.
- What is mezzanine finance?The layer between the senior debt and the equity: a second charge or a subordinated loan that fills the gap a senior lender will not, on a development or an acquisition.
Borrowing against a property
The property, the amount and whether the company occupies it or lets it are enough for us to check the case against lenders’ published criteria before anything is sent anywhere.
Sources
Checked 26 October 2026 against the legislation as published on legislation.gov.uk. This page explains the law of England and Wales in general terms and is not legal advice.
- Law of Property Act 1925, section 87: charges by way of legal mortgage
- Law of Property Act 1925, section 101: powers incident to estate or interest of mortgagee (the power of sale)
- Land Registration Act 2002, section 27: dispositions required to be registered
- Companies Act 2006, Part 25: company charges
- Companies House: CapExpand Ltd 14433858
Important information
Think carefully before borrowing. Property or other assets offered as security may be at risk if you cannot keep up repayments.
CapExpand Ltd (FRN 1060885) is a credit broker and an Appointed Representative of White Rose Finance Group Limited (FRN 630772), which is directly authorised and regulated by the Financial Conduct Authority. We are a broker, not a lender. We work with UK limited companies and LLPs only, for business and commercial purposes. We do not provide financial advice.