Land Registry Restriction

What is a 'restriction'?

A 'restriction' is a means of adding a level of security to your loan. When the restriction is entered on the title of your property, the borrower must evidence certification to demonstrate that he has satisfied the loan conditions, in order to dispose of that property. Failing to meet the requirements of a restriction could provide a solid basis for investors to pursue legal action against the borrower.

What potential risks remain?

An investor could still suffer loss in the following scenarios:

1. Borrower defaults - the investor will not be entitled to the power of sale. Such right may be claimed successfully through legal action, if the investor had consistently taken reaosnable steps to recoup payment.

2. Borrower goes bankrupt - the lender will become a creditor alongside all other creditors.

3. Borrower has taken out a fixed charge and defaults - the fixed charged mortgage lender could exercise a power of sale, and all payment owed to the fixed charged mortgage lender will be settled from the sale proceeds. No funds may remain for the investor. 

4. Creditor applies for charging order on borrower in debt - secured debts by the borrower may be registered as equitable charges, and thus may prioritise their repayment before repayment to investors.