What Is a Legal Charge on Property?

A legal charge on property refers to a mortgage on land, buildings or other assets, explains Fortune Law. Legal charges arise from agreements that give lenders an interest over a borrower’s assets. A legal charge does not confer ownership rights.

Legal charges are a method of securing debts, notes Fortune Law. However, these instruments do not give creditors ownership rights over land or any other property used as collateral. Instead, they legally limit what a borrower can do with the asset in question. If the borrower reneges on the terms of the agreement, a lender has the right to enforce the legal charge. Under certain circumstances, the lender can enforce the agreement without going through a court.

There are two types of legal charges, explains Company Law Club. A fixed charge is created on specific assets such as land and buildings. A floating charge, on the other hand, is created on all current and future assets that a borrower owns. Unlike fixed charges, floating charges allow companies to exploit assets securing a debt in the course of their operations without constantly seeking consent from the lender.

Floating charges are typically the preserve of select individuals and corporations — limited liability partnerships, companies, and under certain circumstances, farmers, warns Fortune Law.