In specialist lending, it’s often the edge cases that define your proposition. One example of this in action is where security is provided by way of a third party legal charge. While it might sound niche, it’s an important and often misunderstood mechanism that can be the difference between a deal working or falling apart. And, truth be told, it’s something many lenders shy away from.
What is a third party legal charge?
Simply put, a third party legal charge is where security is taken over an asset owned by someone other than the borrower. For example, a company may be seeking a business loan but pledges a director’s personally owned property as security. That’s a third party charge: the borrower and the asset owner are two different parties.
It can also work another way. A borrower might use a property owned in a different name or vehicle as additional or top-up security to raise the funds needed for a particular transaction. The loan could be made to an individual or a company, with the charge registered over a property not owned by the borrower. In both cases, this approach requires an extra layer of legal work and due diligence, but it’s entirely legitimate when structured properly.
Many lenders lack the expertise to lend on this basis. A third party legal charge tends to be a bit more work. These deals often require independent legal advice for the third party, additional documentation, and robust checks to ensure the loan is genuinely for business purposes, to avoid any regulatory blurred lines.
At Inspired Lending, we always use a common sense approach. If a borrower has a suitable asset to support the loan, even if it’s not in the borrower’s name, and the overall loan makes sense, we’re always open to a conversation.
We’ve got the knowledge and experience to manage these situations cleanly and easily, and our legal teams understand the requirements to protect all parties.
We also work closely with brokers to ensure the deal structure is crystal clear from the outset. Often, these cases involve more than one party needing legal advice or providing information, so transparency is everything.
Real examples from the front line
For example, we recently supported a long-established business owner who wanted to unlock working capital by using their home as security. The business was the borrower, the asset was in the owner’s name, and the requirement for funds made complete sense. Another case involved a company buying a commercial property, topped up with a charge over a residential buy-to-let held in a director’s personal name.
These aren’t outliers. As the market grows, we are seeing an increase in situations where our ability to be creative and use our extensive expertise enables us to win deals over other lenders. With loan applications reaching £18.34 billion in Q1 2025 alone, a 55% jump from the previous quarter, it’s clear that appetite for bridging finance is at an all-time high.
Equally notable is the fact that completions remained steady at £2.8 billion, matching Q4 2024 figures. This shows that despite seasonal slowdowns, the sector is holding firm, with demand for fast, flexible finance continuing to grow.
Regulation, reassurance and doing it right
One question we sometimes get asked is whether using a borrower’s residential property as sole or part security for a loan makes a loan regulated. Not necessarily. Whether a loan is regulated or not depends on various factors, including the borrowing vehicle and the use of funds, not solely the asset being used as security. It goes without saying that we would always satisfy ourselves with the overall circumstances.
Helping brokers see the full picture
The truth is, many brokers don’t realise this is an option. So much of the market defaults to simple structures and fast ‘no’s that it can feel like flexibility is off the table. But that’s exactly where lenders like us add value.
We want to encourage brokers to explore all the options available to their clients, especially those in more complex positions or with valuable, lowly geared assets not directly tied to the borrowing entity. Third party charges can be the key to unlocking those deals.
