Charging Orders and Order Of Sale

[storm]

Don't know why I haven't thought of asking this on here before

Situation at the moment is that we have a mortgage, a horrifically high re-mortgage with London Mortgage company and two charging orders (obtained in the days when we didn't fight things)

Our two mortages alone total 1,400 per month not including bills, other debts etc

Me and the wife actually both earn good money, but have nothing left each month and the only way out is to sell the house

We tried last year anfd whilst there was enough to pay both mortgage companies there was not enough to pay off the charging orders, and of course the companies involved refused to let us sell it

The ridiculous thing is they keep sending us letters saying they will go for an order of sale if we don't pay up (er yes that is what we want you idiots), but of course they won't while there is no equity

Question is this, can we apply for an order of sale, ie let a judge decide we can sell it. I treally is the sensible way out as our mortagge payment will drop from £1,400 to a rental of about £550-£600 and we will be able to pay up other creditors

Yes, the companies concerned will argue and lose out short term, by not getting their money immediately, but not in the long term

Any ideas?

[lookinforinfo]

Tricky situation Storm.
You may need to get an independent company [National Debtline 0808 808 4000 ] to explain the facts of life to those muppets. That if you fall into
arrears with your mortgages, that whatever money is finally raised when the house is sold, will all go to the mortgage companies and the DCAs will get
diddly squat. Or they can be realistic, allow the sale to go through and get
a lump sum payment now which while not 100% is better than they can expect if they keep delaying the sale of the house.
That being said, if you can hold out for a while, it would be a shame to
lose all/most of the money you have invested in the house over the years.
Is there a way in which you could perhaps take in a lodger or something to
increase your income?

[sequenci]

Originally Posted by lookinforinfo

Is there a way in which you could perhaps take in a lodger or something to
increase your income?

good call, under the rent a room scheme you can earn £4250 a year without having to pay tax.

orders for sale are pretty rare, usually creditors are happy to sit on the charge until you sell.

how much is the negative equity?

[storm]

No room for lodgers, we have 3 kids

Tried national debtline and they weren't really sure themselves

Basically the 2 mortgages would get paid off, and we have 2 charging orders of 7k and 3k

The 7k one would probably get about 3k, the other one obviously nothing

A farce really because as I say, they keep threatening to go for an order of sale in their standard letters, but of course will not do so

[storm]

Top give you an idea of our outgoings my wife and I have a joint income of about 3.5k per month and it is not enough, however getting rid of the second mortgage by selling the house would make a huge difference to life

[jannercobbler]

I have used this to prevent repossesion of a friends house whilst they try to sell, (i know your situation is the reverse but there is some good points in it), and cases / precedents that may help you (I have highlighted the important parts in red).

Until mid-way through the last recession lenders nearly always refused to allow struggling borrowers to sell if there was negative equity - effectively forcing customers into repossession instead. Then a court ruled in certain circumstances that they should allow you to sell and pay off the remaining mortgage without security.

Your right to sell the property for less than the value of the mortgage was first established in 1995 in the Barrett v Halifax Building Society case. Click the following link for a rough outline of Barrett v Halifax case http://www.svc.org.uk/~mark_withers/.../autumn95.html but bear in mind that the law has moved on since 1995.

This is a tricky area of law but hopefully you will be able to use this explanation to help you work out your options.

If you think your lender is going to repossess you, you can apply to the County Court for the right to sell the property first. The law that allows you to do this is section 91 of the 1925 Law of Property Act.

If your lender has already applied for a warrant for possession of the property, you may still be able to try to sell the property first. If you think you can cover the entire mortgage by selling the property, you will need to apply to the court to halt the possession until you have tried to sell the property. You need to ask the court to use its powers under section 36 of the Administration of Justice Act, 1970. The reason you can apply for the court to use its section 36 powers even though your lender has already applied for a possession order is because doing so was made law by an Appeal Court precedent case called Cheltenham and Gloucester plc v Krausz [1997]1 ALL ER 21, CA. You will probably have to point this out to your solicitor - most of them don't know anything about this.

The only difference that the Krausz case made was allow you to ask the court to give you time to sell even if your lender has already applied for a possession order. It assumes that you can convince the court that you are likely to be able to recover the full amount owed from the sale. So getting valuations from a few estate agents is an important part of fighting repossession. It's an important part whether you keep the property, sell it or lose it to repossession. You must get several written valuations.

In some cases you may be able to sell the property yourself rather than let your lender repossess it - even if you do not think you will be able to pay off the mortgage debt from the sale. You can do this - sometimes - because of another Appeal Court case called Palk v Mortgage Services Funding plc [1993] Ch 330 CA. However, you will only be able to argue for the right to do this if you can show the court that you will be able to pay off the remaining debt from other source, eg a small loan or from cash.

There are some other things that affect whether the court will let you use section 91 of the Law of Property Act 1925. For example, you must be able to sell the property and pay off the mortgage in a reasonable period of time. That's not always easy when the market has tanked. Your lender might argue that you may be able to sell the property but not within a reasonable period of time.

There isn't much guidance about what is a reasonable period of time. But it looks as though it is one year if you can pay off the whole mortgage from the sale of the property. This was established by National and Provincial Building Society v Lloyd [1996] 1 All ER 630 CA.

Basically, there is some room for manoeuvre about how long you should have and how much of the mortgage you should be expected to be able to repay from the sale. If the sale is likely to generate much more cash than the mortgage debt, you are more likely to be given a year or longer to sell the property. If the sale is likely to leave some money owing then you are likely to be given a shorter time in which to sell it. You will also be expected to supply the court with details of your income and expenditure to support your detailed plan for how you will pay any remaining mortgage that you will owe after the sale.

There is another problem with all of this. Lenders don't necessarily need to get a repossession order (or warrant of possession) to sell your home. Unless the mortgage terms expressly - or implicitly - say that your lender needs to get a court order, then they don't. This was piece of law was established by another Appeal Court case - Ropaigealach v Barclays Bank plc The Times Law Reports, January 6, 1996, CA.

This is why there is no court record of so many voluntary repossessions. The lenders would have simply have taken possession and sold them.

The problem that this lack of a need for a possession order creates is that you may not be able to stop your lender taking possession before you sell the property under your section 91 Law of Property Act 1925. However, you may be able to apply to the court for an injunction to stop the lender from selling the property. This is an undefined area of law and you may just have to take your chance and try it but it is probably only worth bothering to try for an injunction if the sale of the property is likely to repay the full amount of the mortgage debt. This is just my opinion though and I am not a lawyer.

JC