Charging Order & hypothetical question

Zimmie · 17th May 2007, 16:54

This is purely a hypothetical question.....I obviously need to get a life and stop these strange thoughts that go around in my head

OK...you have a mortgage for £62K plus a charging order for £24K. The mortgagee is unable to work and finds that they are no longer able to afford to pay the capital repayment on the mortgage, the interest is paid by DWP. Due to financial hardship the property has fallen into disrepair. The mortgagee puts the property up for sale and the best offer is £68K. After paying back the mortgage plus solicitors costs they are left with £3K, which will not cover the charging order. The former mortgagee is now in rented accomodation as they cannot afford a mortgage, or even get one because of the CCJ and charging order.

What would happen regarding the charging order?

sequenci · 17th May 2007, 17:42

the people holding the charge may object to the sale of the property although i guess there is nothing to stop a repossession if the mortgage payments were stopped. i guess the charge would be lifted and the amount outstanding would return to being "just" a money judgment.

Zimmie · 17th May 2007, 18:12

Hi Sequenci, So does that mean that the people holding the charging order can stop a person from selling their property, and do you need their permission to put a property with a charging order against it up for sale, and maybe subsequently accept an offer?

sequenci · 17th May 2007, 18:19

thy sure can, you would need to go to court to obtain an order for sale. more info off our factsheet on negative equity:

SELLING YOUR HOME

You may be able to sell your house with permission from your lender. You will need their agreement as they can stop a sale going through if the sale price will not cover the outstanding mortgage. You will need to persuade them that you have obtained the best possible price for the property. Point out that if the house was sold by your lender they would be likely to get a much lower price as the property would be empty and could fall into disrepair.
The FSA Mortgage: Conduct of Business Rules say that a lender must "deal fairly" with anyone in arrears. It also says the lender must "give consideration to the customer being allowed to remain in possession to effect a sale". This means that if you cannot afford to stay in the house, the lender must look seriously at allowing you to sell the house yourself whilst you are still living there.
If your lender refuses to let you sell the house it is possible to apply to the county court for an order for sale under the Trusts of Land & Appointment of Trustees Act 1996. The court can order a sale on whatever terms it thinks reasonable, even if your lender objects.
In some circumstances you can use Palk v Mortgage Services which is a case where the lender was ordered to sell the property after repossession rather than rent it out indefinitely. This was because the rent would not have covered the interest being added to the mortgage so the debt was still growing.
In the Halifax v Barratt case the court let the borrowers sell the house for the "best possible price" even though the Halifax refused permission for the sale.
The borrowers were also allowed to take the sale costs out of the sale proceeds before the money went to the lender.

Talk to the lender about selling your home yourself.
You may have to prove to your lender that sale is the last resort and the sale is in everyone's financial interest.
Provide your lender with full information about your financial circumstances.
You will need evidence from several independent estate agents that you have found the best sale price for your home.
The lender may ask you to sign an extra agreement saying how you will repay the shortfall debt.
Consider handing the keys in and making an arrangement to clear the shortfall once the house is sold by your lender. This is only an option if you do not want a new mortgage in the near future as your details will be on the Mortgage Possessions Register for six years.

Zimmie · 17th May 2007, 18:56

That is considering the mortgagee is in arrears with their mortgage though..I'm thinking that the lender refers to the mortgage provider in this factsheet.

I just found this on Debt Collector Online

CHARGING ORDER If the Debtor owns a property or land, it is possible to “register a charge” against the property to show that you have an interest in the sale and should secure payment provided that there is sufficient equity in the property. A charging order prevents the debtor from selling his or her property or land without paying what he or she owes you. Any charge obtained will not take priority over existing charges, such as a mortgage.

sequenci · 17th May 2007, 18:58

Quote:

Originally Posted by Zimmie

That is considering the mortgagee is in arrears with their mortgage though..I'm thinking that the lender refers to the mortgage provider in this factsheet.

if there were no arrears the people who hold the charge could object to the sale, hence the order for sale being needed.

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