ABSTRACT
Virtually all forms of security are contract-based, but they fall into two categories: the
use of assets as security and the use of third parties as security.
Where assets, and especially land assets, are used as security for loans the lender
will require an indemnity agreement allowing him to claim against the assets if the
loan and interest are not repaid. Virtually all legal systems require formal registration
of this potential claim in one way or another before it can become valid against a third
party. This is to prevent the risk of a third party buying the asset without being able to
find out that someone already has a claim against it. In the UK, for instance, security
against land or buildings will generally be in the form of a ‘charge’ against the assets
which must be registered, usually under the Land Charges Act 1925. (A mortgage is
another example of a charge.) The charge may be a fixed charge against a particular
asset, or it may be a floating charge, which is a charge against all the assets of a
particular type that happen to be owned by the debtor at any time. Banks normally use
floating charges as security for overdrafts.
