A charge in land transactions is an interest in land securing the payment of money or money’s worth of the fulfilment of an obligation. In simpler terms, charging property is basically using land as security for a loan. Below are some of the frequent questions we get in regard to charging land:
- Will my land be transferred to the Chargee’s name after I sign the Charge Document and receive my loan?
No. The Chargee has no right to transfer the land to its name. A charge is a security and not a transfer. The Chargee only has the right to enter and take possession of the land when there’s a default in paying the loan. Therefore, one must try as hard as they can to settle their debt with the Chargee to avoid losing their land.
- Do I have to seek my wife’s consent before Charging Land?
Yes, the Land Act provides for the need of spousal consent before charging matrimonial property. Charge documents must be assented by both the Chargor and the spouse.
- Can the Chargee change the interest rate of the Charge after I have signed the Charge Documents?
Yes, the Chargee is allowed to either decrease or increase the interest rate if it was stated in the Charge document that the rate is variable. If the Chargee decides to change the rates, a 30 day Notice must be given to the chargor clearly stating the new rate.
- Can the amount secured by my Piece of Land be revised?
Yes. The amount secured can either be increased or decreased by the Chargee but a signed memorandum has to be sent to the Chargor before any such changes are made. The same applies to when a change in the term of the charge is made. This Memorandum must be endorsed or annexed to the charge instrument.
- What are my responsibilities as a Chargor once the Charge is registered?
As the Chargor, you will be required:-
- To pay the principal amount as agreed.
- To pay all rents, charges, taxes, and other outgoings related to the charged land.
- To keep the buildings in the charged land in good shape.
- to ensure by insurance or any other means that may be prescribed or which are appropriate, that resources will be available to make good any loss or damage caused by fire to any building on the land.
- To use the charged land in a suitable manner if it is agricultural land
- Not to lease or sublease the charged land or any part of it for a period longer than 1 year without consent of the charge.
- Not to transfer the charged land or part of it without the Consent of the Chargee
The Chargee has the right to use its resources to keep the property in good shape if the Chargor fails to.
- Is it possible to transfer my Charge to someone else?
Yes, it is. A chargor can request a charge to be transferred to someone else. This person can be anyone with interest in the land or a surety for the payment of the amount secured by the charge. This person can also be a creditor for the Chargor.
- What happens after I finish paying my loan?
Upon payment of all monies to the Chargee and all obligations have been satisfied, the Chargor has the right to redeem his property. The Chargor will send a 30 day Notice of Intention to Discharge to the Chargee and the discharge process starts from there.
- What happens if I default on the Loan payment?
When you continue to be in default for a month, the Chargee will serve you a Notice informing you of the Nature and Extent of your default, the amount that must be paid to rectify the default, the consequences of the default if not rectified, and your rights as a chargor in relation to the Charge.
You must comply with this in 2 months after which the chargee will have full liberty to sell your land, enter and take possession of your land, lease your land and if its already leased, sublease it, appoint a receiver on the income of the land or sue you.
- Once my land has been sold by the Chargee in the event of default, how is the money going to be used?
The purchase money received by a chargee who has exercised the power of sale shall be applied in the following order of priority—
(a) first, in payment of any rates, rents, taxes, charges or other sums owing and required to be paid on the charged land;
(b) second, in discharge of any prior charge or other encumbrance subject to which the sale was made;
(c) third, in payment of all costs and reasonable expenses properly incurred and incidental to the sale or any attempted sale;
(d) fourth, in discharge of the sum advanced under the charge or so much of it as remains outstanding, interests, costs and all other money due under the charge, including any money advanced to a receiver in respect of the charged land;
(e) in payment of any subsequent charges in order of their priority, and the residue, if any, of the money so received shall be paid to the person who, immediately before the sale, was entitled to discharge the charge.
- Can I be given another loan by the chargee on the same piece of Land initially charged?
Yes. This is called a Further charge and it applies in the same manner as the first charge. However, any sale under the power expressed or implied in any such charge shall be expressed to be subject to all prior charges unless all those charges have been discharged. Where a second or subsequent charge is to be created, the consent of the first charge shall be obtained before the second or subsequent charge is registered.
Interested in using your piece of land to get a loan? Feel free to ask any questions you may have on the Comment box below or contact us on 0707077777 or info@maina-partners.com.
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