In the UK, a first legal charge is typically used to secure a main mortgage or other loan on a property. When a borrower takes out a mortgage, the lender will require a legal charge to be placed on the property as security for the loan. This means that if the borrower defaults on their mortgage payments and the lender needs to repossess property to recover their money, they have the right to sell the property and use the proceeds to pay off the outstanding mortgage debt.
The first legal charge is the most senior charge on the property, meaning it has priority over any other charges that may be placed on the property. For example, if the borrower takes out a second mortgage or a home equity loan, the lender for that loan would typically have a second legal charge on the property. In the event of a default, the lender with the first legal charge would be paid off before the lender with the second legal charge.
