This ones complicated...

[tigerthecat]

I have recently loaned a sum of money to friends to help them from having their house repossessed. They have now split up under awful circs. Neither is in a position to repay and I'm not sure what to do for the best. :-)

[themas]

I hope you have some written evidence of the loan.

If you want to protect your loan as much as you can, you need to take County Court action against the borrowers. (I assume the amount of the loan is now due to be repaid - if not, you can't take action until it is.) You should then - if the Court accepts the evidence that there was a loan - get a County Court Judgement. If the borrowers do not then comply with the terms of the judgement you can apply back to Court for a charging order on the house. Then, when/if the house is sold you can get your money back if there is sufficient equity after paying off the mortgage.

This process will cost you in Court fees and lose you your friends. You have to decide whether its worth it.

[Peter Pedant]

Get them to admit that there is a loan from yousecured on the house.
They may be willing to do that .
after all it is whathappened, and lots ofpeople are cheerful about admitting what happened.

When theysell the house - andthat seems almost inevitable, then you can claim your money back. - do it through the solicitor who is selling the house.

[tigerthecat]

Loaning the money and them splitting up happened in a matter of 2 weeks. I suspect the stress contributed to this. Therefore I was not anticipating the moneys return just yet. In terms of evidence although I didn't get a reciept I did have a witness. Although I have confidence in them I am consious that I should look at safeguarding the loans return sometime in the future. As I loaned the money to both what should I be asking them for to ensure things go well in the future. I wasn't sure how to get them to say/write that the loan was secured against the house. Should I give them a time limit. I don't want to add to their stress but I dont want things to go pear shaped in the future. Thank-you both for your advice any more would help :-)

[themas]

From what you say, the loan is not secured on the house. It would only be so if a charge (similar to a mortgage) had been put in writing and entered onto the Land Registry title of the house.

I assume they own the house jointly. If they both agree to a charge document being prepared now then you could get the loan secured on the house without the Court process I described before. But you would need a solicitor to make sure it was done properly. The document must include details of repayment arrangements because it is only if these are breached (i.e. by them not making a payment on time) that you could later go to Court (if you wished) and ask for an Order for Sale to get the house sold and your money back.

All this assumes there is enough equity in the house after the mortgage is paid off to cover the amount of your loan. If they are already in negative equity there is little point in doing it unless you think the house won't be sold for years and will increase in value.