A chattel, under UK law, means any possession other than freehold land. This definition includes both tangible goods that we can touch, and leasehold interests that we can sell and trade. This article narrows the field to portable chattels, and how we can use them as collateral against chattel mortgages.
How Portable Chattels Vary from Freehold Land
Property law deals with the allocation, use, and transfer of wealth and the objects of wealth, according to Britannica. As such, it reflects the economy of the society to which it applies. This article addresses secured loans over portable assets in the UK. Regulations may be different if you live elsewhere.
A mortgage is a type of security interest, whereby a lender secures an interest in an asset in exchange for a loan. The borrower may not sell or trade the secured item until the security is lifted, usually by settling the debt. However, the UK statute of limitations renders much debt null and void after a period of time.
Freehold land is a permanent asset, often with buildings situated on it that may endure for centuries. Chattels and other personal property are more transient, and depreciate more quickly. Hence, UK law treats chattel mortgages differently from freehold ones:
- Secured rights over freehold land have longer statutes of limitation and are harder to overturn.
- Secured rights over tangible chattels may automatically expire in the UK after six years.
- For these reasons, the UK legal system treats these two types of secured loans differently.
Mortgages over portable chattels are generally weaker and less enforceable than those over fixed property. And may therefore be over shorter periods, and more difficult and more expensive to arrange.
The True Facts Behind Chattel Mortgages
It may be more difficulty to arrange a mortgage over a movable item of property, than you imagine at first sight. However, in principle the procedure is straightforward:
- Apply for a loan over a movable asset, with value, from a willing lender.
- Transfer temporary ownership of the asset from yourself to that lender.
- Receive the loan funds, and comply with the mortgage requirements.
- Ensure the mortgage agreement is uplifted after fully repaying the loan.
However, as already mentioned, you may expect to pay loan interest at a higher rate than a fixed property mortgage. That’s because these loans (also called security interests, or trust receipts) are riskier from the lender’s point of view.
The above assessment includes mobile homes, and other portable structures that do not permanently attach to fixed foundations. In these instances the mobile buildings act as collateral, although the portable chattels remain in the possession (but not the ownership) of the borrowers.
Businesses frequently raise chattel mortgages over large pieces of new, specialist equipment, in order to be able to purchase them. However, Investopedia confirms that they also retain the right of use in this instance, as they would with a new car.
In both instances though, the lender / seller has the right to take the item back if the purchaser defaults, in order to recover the outstanding balance. In summary then, thus far:
- A chattel mortgage is a loan secured by an item of movable property.
- This loan is documented to evidence the obligation and the security interest.
- Portable chattels can become security for loans if they hold sufficient value.
How Much are These Items Worth (Image ©Avery Associates)
Avery Associates Advises on Portable Chattel Value
The value of a particular chattel mortgage depends on the objective worth of the securing item, as if sold on a willing seller and willing buyer basis. Avery Associates helps parties negotiating chattel mortgages agree on portable chattel values.
Many of these chattels are collectible items that a defaulted lender should readily be able to convert to cash in an open market. Avery Associates has deep experience of valuing the following, although this is by no means an exhaustive list:
- Diamonds, emeralds, rubies, and other precious stones in jewellery.
- Rare vintage postage stamps in mint, or ‘as-new’ condition.
- Old coins in mint condition, which were issued for circulation.
- Childhood toys, from comic books to models, cards and dolls.
- Art works, be they paintings, sculptures or other creative objects.
- Silverware including dining tableware, flatware, and other collectibles.
Meet the Team at Avery Associates
Avery Associates began as a London-based company in 1978, serving the City and the Greater London area. Since then, we have expanded the range of services we provide, and operate nationwide under guidance of our core team:
- Jeffrey Avery, managing director and expert valuer of a wide range of collectibles.
- Allan Darwell, fine art and painting adviser with 45 years’ experience of the London market.
- Stuart Billlington, stamp specialist consultant with 35 year’s experience in philately.
- Clifford Lansberry, property expert and member of Royal Institute of Chartered Surveyors.
Would you like to explore our valuation services further as a prospective borrower or lender? Here are our contact details to get the ball rolling:
- Avery Associates, 291 Mitcham Road, Tooting, London SW17 9JQ
- Freephone: 0800 567 7769, Head Office: 0208 640 00 44
- Email: info@averyassociates.co.uk
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