A "charge" in property law is a legal interest in a property that secures a debt, granting the lender (chargee) certain rights over the property if the borrower (chargor) defaults on the debt. Unlike a mortgage, a charge does not transfer ownership; instead, it provides a security interest that allows the lender to recover the debt by selling the property if necessary.
Key aspects of a charge:
- Security Interest:
A charge is a way to secure a loan or debt by using a property as collateral.
- Chargor and Chargee:
The owner of the property (the borrower) is called the chargor, and the lender is the chargee.
- Rights of the Chargee:
The chargee has the right to take possession of the property and sell it if the chargor defaults on the debt.
- No Transfer of Ownership:
A charge does not transfer ownership of the property to the lender. The chargor retains ownership even while the charge is in place.
- Types of Charges:
There can be formal and informal charges. Formal charges are typically registered and documented, while informal charges are often written understandings between parties.
- Enforcement:
If the borrower defaults, the chargee can initiate legal proceedings to enforce the charge, potentially leading to the sale of the property to recover the debt.
- Discharge:
Once the debt is paid off, the chargee is obligated to discharge the charge, meaning it is removed from the property's title.
- Importance of Discharge:
A discharged charge means the property is no longer subject to that specific security interest, allowing for easier future transactions.
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