A Deed of Postponement is a legal document used in the UK mortgage market to change the order of priority of charges secured against a property. This document is typically used when a homeowner has more than one mortgage or secured loan and wants to take out additional financing, such as a further advance or a new secured loan, but needs to adjust the priority of the existing charges to facilitate the new loan.

Key Features and Uses of a Deed of Postponement

1. Order of Priority:
   • Mortgages and secured loans are registered as “charges” against a property. The order of these charges determines the priority of repayment if the property is sold or repossessed. The first charge lender (usually the first mortgage provider) has priority over subsequent charges.
2. Purpose:
   • A Deed of Postponement is used to allow a new lender to take priority over an existing lender, or to adjust the order of existing charges. This is often necessary when a homeowner wants to take out a second mortgage or secured loan, and the new lender requires a higher priority than the current second charge lender.
3. Agreement Between Lenders:
   • The existing lender(s) must agree to the Deed of Postponement. This agreement involves the current first charge lender agreeing to postpone their priority in favor of the new lender or the existing second charge lender agreeing to postpone their priority for the new loan.
4. Documentation:
   • The Deed of Postponement is a formal legal document that must be signed by all parties involved (the homeowner and the lenders). It is then registered with the Land Registry to update the official records of the property’s charges.

Typical Scenarios for a Deed of Postponement

1. Further Advances:
   • When a homeowner with an existing mortgage wants to borrow additional funds from a different lender, the new lender may require a higher priority to secure the additional loan.
2. Remortgaging:
   • If a homeowner is remortgaging their property to a new lender and the new lender requires first priority, any existing second charge lender must agree to postpone their charge.
3. Debt Consolidation:
   • Homeowners consolidating debts with a secured loan might need a Deed of Postponement to ensure the debt consolidation loan has the required priority over other secured loans.

Legal and Financial Implications

1. Lender Approval:
   • Existing lenders are not obliged to agree to a Deed of Postponement. They will assess the risk and implications of postponing their charge before consenting.
2. Borrower Impact:
   • For the homeowner, obtaining a Deed of Postponement can be crucial for securing additional financing. However, it can also involve legal fees and delays due to the negotiation and agreement process.
3. Documentation and Registration:
   • The Deed of Postponement must be accurately drafted and legally binding. It should be registered with the Land Registry to ensure that the changes in charge priority are officially recognized.

Process of Obtaining a Deed of Postponement

1. Negotiation:
   • The homeowner or their solicitor contacts the existing lenders to request agreement on the Deed of Postponement.
2. Drafting the Deed:
   • A solicitor drafts the Deed of Postponement, detailing the changes in priority and obtaining signatures from all parties involved.
3. Approval and Signing:
   • All involved lenders review, approve, and sign the Deed of Postponement.
4. Registration:
   • The signed Deed of Postponement is submitted to the Land Registry to update the property’s charges and their priorities.

Conclusion

A Deed of Postponement is an important legal instrument in the UK mortgage market, allowing homeowners to adjust the priority of secured loans and facilitate additional borrowing. It involves negotiation and agreement between existing lenders and the new lender, with legal documentation required to formalize and register the changes. This ensures that the priority of repayments is clearly established, protecting the interests of all parties involved.