Q&As

Company X has a first legal charge secured against a property. The second legal charge holder is in the process of issuing possession proceedings. If the second charge holder successfully obtains possession order, how will this effect Company X’s first legal charge? For example, will the second charge holder need to pay Company X before they can do anything with the property, ie sell the property?

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Produced in partnership with Christopher Snell of New Square Chambers
Published on: 03 November 2016
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In answering this Q&A, we have assumed that there is no inter-creditor agreement as between the first and second legal charge holders: such that no contract exists which sets out any obligations that the second legal charge holder may have in the event that it enters into possession in circumstances whereby the first legal charge remains unsatisfied.

Entry into possession of the property by the second charge holder does not affect the first legal charge holder’s Priority, such that its interest in the Equity of redemption falls to be settled before the interest of the second charge holder.

Further, entry into possession of the property by the second

Christopher Snell
Christopher Snell

New Square Chambers

Advice and representation in all areas of commercial and chancery litigation.

Instructed on behalf of both retail and investment banks [including BNY Mellon; HSBC; Royal Bank of Scotland] in relation to a variety of commercial issues.

Retained in relation to a wide range of international disputes; including disputes in the Bahamas; Isle of Man; BVI and Kuwait.

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Jurisdiction(s):
United Kingdom
Key definition:
Priority definition
What does Priority mean?

The ranking of security interests ie the order in which each of the secured creditors can claim on the secured property in an enforcement or insolvency scenario. A deed of priority or intercreditor deed can vary the priority a security interest enjoys by virtue of general law.

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