I was just reading about Charging Orders on properties for unsecured debts eg. credit cards, bank loans.

Am I correct in thinking that if the debt is under £5000 there is no interest applied, but there is if over £5000? Is this a set rate % by the court or is it open to abuse? That seems unbalanced...

I presume they have to notify you of the intention to charge your property. If you have a CCJ and have agreed payments that you have kept up to date, am I correct in thinking the lender/creditor cannot initiate a charging order?

I also read that one cannot be forced to sell their home? Do they continue to chase the borrower? I see they can issue/request an order to sell?

I understand the charge is recorded and monies will go to the creditor if or when you sell - I wonder what happens if they are no longer in business or merged x number of times?

Thank you for any information. There is a lot of information out there but sometimes you cannot find the specifics.

Statutory interest only accrues on judgment debts in excess of £5K, and if the debt arises out of an agreement regulated by the Consumer Credit Act then it doesn't accrue even if the judgment does exceed 5K. Currently the statutory rate is 8% and has not changed for probably 20 years or so. A charging order cannot be applied for unless there is default under the terms of the judgment (though legislation is pending which might change that). The procedure is that the initial decision is made by a judge on paper and an interim charging order granted without notice to the Defendant, which can be registered at the Land Registry. A hearing is then fixed to give the debtor a chance to oppose the application. At that hearing the judge will either make the charging order final (i.e. confirm it) or dismiss it if there are reasons not to make it.

There is nothing to stop a creditor proceeding with other enforcement when they have a charging order. It is not an alternative to payment. The charging order means that the creditor will have to be paid when the property is sold or remortgaged (assuming there is sufficient equity), but a creditor can issue separate proceedings seeking an order for the sale of the property. Essentially this is similar to repossession proceedings. Most respectable financial institutions would only do this in exceptional cases, e.g. where the debt is large and the debtor is making no effort to pay it off. Ultimately though the court has the discretion whether to order a sale or not.

If a CCJ is already in place and there is no breach in the payments order made the creditor may just go for a re-determination and ask for a fortwith award so that they can then slap in a CO. Whilst some Judges have given short shrift there are others who have approved the re-determination - possibly mindful of the direction of the prevailing winds?

With regard to contractual interest - firstly the creditor would have had to request that contractual interest is to be applied when they made the CCJ request and their 'right' to apply it would have had to be detailed in the orginal credit agreement. This does not mean that they wouldn't try to apply contractul interest post judgement or when the CCJ had been repayed - however IMHO I think they would have to apply for a subsequent CCJ to enforce the contractual interest if anyone knows of this happening I'd dearly like to know the outcome.

My husbands creditor was awarded a CCJ forthwith, the contractual interest was refused on the grounds that they could not provide a true or original copy of the agreement that detailed the right to contractual interest. At re-determination a monthly payment was agreed but a CO was awarded. The CCJ was amended to include the Judge's direction that so long as the monthly payment was made re-posession was prohibited.

Correct, if there is a contractual right to post judgment interest the creditor would have to sue again to get it. I doubt any of them bother. On the issue of a redetermination to get a CO, it is entirely at the whim of the judge and as you state some have diametrically opposite views so impossible to call. It is also common when granting a final CO for the judge to direct that no order for sale proceedings are to be taken for as long as certain repayments are made. Ultimately an OFS is in the discretion of the judge too.

With regard to contractual interest - firstly the creditor would have had to request that contractual interest is to be applied when they made the CCJ request and their 'right' to apply it would have had to be detailed in the orginal credit agreement. This does not mean that they wouldn't try to apply contractul interest post judgement or when the CCJ had been repayed - however IMHO I think they would have to apply for a subsequent CCJ to enforce the contractual interest if anyone knows of this happening I'd dearly like to know the outcome.

I believe as a first step the default notice must clearly state they will be seeking contractual interest if they go for further enforcement actions.

S.

I think all this has made me think that I would never want to borrow money again. For many people, their home is there one bastion of security, and to know that it could be under threat in this way is really off putting, especially when it seems that so much rests on the judge and whether they are having a good or bad day if one did get into difficulties.

Never a more true word said!!

I have a CO but they are trying to claim contractual interest, it is a nightmare, and judges rarely help or care!!

I thought that if your claim was covered by the Consumer Credit Act that interest could not be claimed? Perhaps yours is not.

If that is true about the judges, then I would suggest that they are failing in their duty to be impartial, and that is a basis for some kind of complaint? I suppose this depends on many factors in each case. I am sorry to hear that your experience of the courts system has not been positive.

App despite the debt being one that is a CCA they are still claiming.

I think the most difficult aspect is that we are often dealing with DJs that are experts in Divorce / Child and Family issues.

DCA s often try to take the moral high ground and the judiciary fall for it l'm afraid!!

Cups

Garmston Grimsdyke wrote: "There is nothing to stop a creditor proceeding with other enforcement when they have a charging order. It is not an alternative to payment. The charging order means that the creditor will have to be paid when the property is sold or remortgaged (assuming there is sufficient equity), but a creditor can issue separate proceedings seeking an order for the sale of the property."

Be careful with this information as this is NOT the case if a Charging Order is made against only one person in a jointly owned property.In this situation the CO can only be registered as a "Form K Restriction" which has no power of obligation placed on automatic repayment to the Restriction holder when a property is sold to a third party with an exchange of money.

Received today from LR Solicitor;

LAND REGISTRY RESPONSE

"The provision of the Certificate mentioned in the Form K restriction means that the registrar is not prevented from proceeding with the application to register a disposition (for example, a transfer or charge) and the registration can proceed.

The certificate does not affect the restriction entry. A restriction in Form K may be removed from the register in the following circumstances.

Automatic cancellation

When a transfer of property is registered (following receipt of the required certificate) the restriction may or may not be automatically cancelled, depending on the circumstances of the transfer. If, for example, the application is to register a transfer by two or more proprietors to a third party for value, the trust interests will be overreached and the form K restriction will usually be cancelled"

This doesn't mean the debt goes away but a Creditor cannot automatically collect and there is no legal obligation placed on the debtor to pay.

I believe as a first step the default notice must clearly state they will be seeking contractual interest if they go for further enforcement actions.

 

S.

for reference re dn - Schedule 2 para 9a of the Consumer Credit (Enforcement, Default and Termination Notices) Regulations 1983.

also note s130A CCA (as amended).

also, there would have to be a provision in an agreement for post J contractual interest.

imo

Garmston Grimsdyke wrote: "There is nothing to stop a creditor proceeding with other enforcement when they have a charging order. It is not an alternative to payment. The charging order means that the creditor will have to be paid when the property is sold or remortgaged (assuming there is sufficient equity), but a creditor can issue separate proceedings seeking an order for the sale of the property."

 

Be careful with this information as this is NOT the case if a Charging Order is made against only one person in a jointly owned property.In this situation the CO can only be registered as a "Form K Restriction" which has no power of obligation placed on automatic repayment to the Restriction holder when a property is sold to a third party with an exchange of money.

 

 

Received today from LR Solicitor;

 

LAND REGISTRY RESPONSE

 

"The provision of the Certificate mentioned in the Form K restriction means that the registrar is not prevented from proceeding with the application to register a disposition (for example, a transfer or charge) and the registration can proceed.

 

The certificate does not affect the restriction entry. A restriction in Form K may be removed from the register in the following circumstances.

 

Automatic cancellation

 

When a transfer of property is registered (following receipt of the required certificate) the restriction may or may not be automatically cancelled, depending on the circumstances of the transfer. If, for example, the application is to register a transfer by two or more proprietors to a third party for value, the trust interests will be overreached and the form K restriction will usually be cancelled"

 

This doesn't mean the debt goes away but a Creditor cannot automatically collect and there is no legal obligation placed on the debtor to pay.

Yes indeed a restriction can be removed without payment being made, but the reality is that the vast majority of purchasing solicitors will insist it is paid before completing, and certainly lenders will on a remortgage. So in practice it does result in the charge being settled on a sale/remortgage even if it is not full security. And there is nothing to stop a restriction holder applying for an order for sale either.

No there isn't anything to stop a Restriction holder applying for an "Order for Sale" but the reality is they don't go for them as they know they won't get one (try Googling for case examples and see how many you find). As, I've expounded on another thread; my belief is Creditors who use this tactic are mainly trying to queue jump other creditors as a CO is not included in Bankruptcy either.

It has, also, emerged on quite a few discussion boards that an awful lot of these "vast majority" of Solicitors seem unaware of the changes in the Land Registry rules since 2003 and also the distinction between a Charging Order where a "Notice" is placed and one where a "Restriction" is placed.

So too is the fact people (with a Restriction) are becoming more and more aware of the reality of this distinction and are now selling there houses and moving on without paying the Creditor with the Restriction (even the Inland Revenue website now confirms there is no legal obligation to pay a creditor with a Restriction)

Of, course, nobody can force people to use a Solicitor that knows the rules when they sell their house (with a Restriction) but it needs, in my opinion, to be highlighted that people in this position have a choice.

Solicitors, also, do conveyancing work for money (and I'm talking as the Father of a Solicitor); as soon as they realise they are losing out on a particular market it won't take long for them to change their "usual" stance on the matter. It's business pure and simple.

Also, a re-mortgage won't remove a Restriction. You have to move out selling to a Third Party with an exchange of cash (courtesy of the Land Registry Solicitor)

No there isn't anything to stop a Restriction holder applying for an "Order for Sale" but the reality is they don't go for them as they know they won't get one (try Googling for case examples and see how many you find). As, I've expounded on another thread; my belief is Creditors who use this tactic are mainly trying to queue jump other creditors as a CO is not included in Bankruptcy either.

 

It has, also, emerged on quite a few discussion boards that an awful lot of these "vast majority" of Solicitors seem unaware of the changes in the Land Registry rules since 2003 and also the distinction between a Charging Order where a "Notice" is placed and one where a "Restriction" is placed.

 

So too is the fact people (with a Restriction) are becoming more and more aware of the reality of this distinction and are now selling there houses and moving on without paying the Creditor with the Restriction (even the Inland Revenue website now confirms there is no legal obligation to pay a creditor with a Restriction)

 

Of, course, nobody can force people to use a Solicitor that knows the rules when they sell their house (with a Restriction) but it needs, in my opinion, to be highlighted that people in this position have a choice.

 

Solicitors, also, do conveyancing work for money (and I'm talking as the Father of a Solicitor); as soon as they realise they are losing out on a particular market it won't take long for them to change their "usual" stance on the matter. It's business pure and simple.

 

Also, a re-mortgage won't remove a Restriction. You have to move out selling to a Third Party with an exchange of cash (courtesy of the Land Registry Solicitor)

The problem is that solicitors usually act for the lender as well as so owe a duty to them too. Lenders will want an undertaking from the solicitors that all previous charges etc are discharged on completion.

It's not as simple as the solicitors "knowing the difference".

Ganymede wrote;

The problem is that solicitors usually act for the lender as well as so owe a duty to them too. Lenders will want an undertaking from the solicitors that all previous charges etc are discharged on completion.

It's not as simple as the solicitors "knowing the difference".

Your comment falls into the trap that most people are taken in by on this issue. The Land Registry rules now state that a "Notice" for a Charging Order can no longer be registered on the title deeds for a property where there are joint owners but the debt is only against one of the joint owners.

Hence, the fact ONLY a "Restriction" can be placed on the register.

Therefore, there is no Charge to remove as there isn't the legal power to place one on a property under these circumstances. All that can be placed is a Form K "Restriction" which merely has the power of notification to the person with the Restriction to"flag" that there might be some money floating about they can lay claim to. That's it!

So it IS a simple as knowing the difference as all that is required now to satisfy the Land Registry to allow the transfer to proceed is the providing of the Certificate of Notification that the Restriction Holder has been informed. A Lender or their Solicitor has no right to demand anything else from the seller and the quicker people understand this the more people won't be duped into losing thousand of pounds through misinformation.

Ganymede, are you saying lenders routinely insist on these Form K flagged debts being settled before mortgage funds will be released to the buyer? It seems unlikely to me that they could impose this obligation on the seller unless the latter was trying to borrow from elsewhere to buy somewhere else and the lenders were acting in cahoots. Although I suppose some solicitors would consult with the lender who would insist on principal that settlement of the flagged debts should be a conditional part of the completion process. Or am I being thick and missing something.....

payingonlyencouragesthem

From what I have managed to glean from trawling the discussion boards (and also corresponding with a Solicitor from the Land Registry) is a general ignorance, both on the part of debtors and Solicitors alike, of the changes made in the Land Registry rules since 2003.

It took me three attempts to gain the explanation I have put on here from the Land Registry as the Solicitor said she couldn't be seen to be giving legal advice. But, with a little better phrasing of my question, she had no choice but to explain that a Restriction cannot prevent a sale to a third party for a cash value exchange.

It would seem the "vast majority" of Solicitors aren't making the distinction between "Restrictions" and "Notices" and don't seem to understand or care (take your pick) that there is no legal obligation to pay a Restriction holder out of the funds of a completed sale in order for the sale to proceed.

I take Garmston's point it won't be plain sailing but that shouldn't deter you from making the effort to get what YOU want out of the sale.

Thanks for the clarification eggboxy1. This being the case it may be necessary to sell such a property at auction (where any potential bidder would have done due diligence to make sure his/her lender wouldn't try to impose completion conditions) and / or to a cash buyer as I strongly suspect ignorance / moral predjudice / over caution would cause many a buyer's lender and solicitor to insist that Restricion holders were paid on completion as a precondition.

This isn't a problem that has only existed since 2003, it has existed since the Land Registration Act was brought into force in 1925. Prior to restrictions/notices being created charging orders could only be protected by cautions. Cautions could also be circumvented by conveyancers who knew their way round the rules. The fact remains that usual conveyancing practice is to insist on restrictions being removed by discharging the underlying charging order, whether or not it is strictly necessary. There are only a handful of solicitors either knowledgeable enough or willing to convey a property without paying off a charge protected by a restriction. There are also fraudulent ways of getting rid of charging orders, whether protected by a restriction or a substantive charge, which are very effective.

A charging order cannot be applied for unless there is default under the terms of the judgment (though legislation is pending which might change that). The procedure is that the initial decision is made by a judge on paper and an interim charging order granted without notice to the Defendant

Hello

Just for clarification of your excellent and informative post, could you say if a creditor is permitted to apply for an interim charging order if the debtor has not defaulted on any instalments of the judgement debt?

Thanks

no merchantile credit v ellis seen to that.you would have to be in arrears or handed a "forthwith" judgment,even then an interim order does not automatically mean a final order will be granted.

"The fact remains that usual conveyancing practice is to insist on restrictions being removed by discharging the underlying charging order"

Nobody is disputing this, but the more people are made aware of the actual rules the more this "usual" practice will be challenged.

"There are only a handful of solicitors either knowledgeable enough or willing to convey a property without paying off a charge protected by a restriction"

How do you know this is true? The "knowledgeable" part is silly given it's outlined in the Form K Restriction what's needed to comply. The willing bit hasn't really been tested (and that's my point)

"There are also fraudulent ways of getting rid of charging orders, whether protected by a restriction or a substantive charge, which are very effective"

Why would anyone want to commit fraud when they can do it perfectly legally?

Payingonlyencouragesthem has outlined a way its very easy to complete this process and that's what needs to be highlighted as it's perfectly legal to do so.

If no one has "discovered" this anomaly for the past 85 years it's unlikely to happen now. I know from experience, having seen literally thousands of restrictions, that hardly any conveyancer is willing to bypass a restriction, even when they know very well they can. And, actually, what's the point when you will still owe the money afterwards anyway?

Gaston Wrote: "If no one has "discovered" this anomaly for the past 85 years it's unlikely to happen now. I know from experience, having seen literally thousands of restrictions, that hardly any conveyancer is willing to bypass a restriction, even when they know very well they can. And, actually, what's the point when you will still owe the money afterwards anyway? "

It depends on what your point view is; If you take out a mortgage you pay a low rate of interest because its stamped on your forehead when you sign up that if you don't pay you lose your house. I have no problem with that.

However, the reason Charging Orders have attracted so much attention on discussion boards in recent years is simply because certain Creditors with "unsecured loans" and who have been charging interest rates as high as 34.5%pa (at a time of unprecedented low bank base rates) have been allowed to take the CO route to try and secure their debt when the risk that involved such high interest went sour (so the past 80 of those 85 years are fairly irrelevant)

I, and an awful lot of other people, find this an absolute scandal given the amount of interest the Creditor will have received under the "unsecured" banner. Where was this warning on the loan agreement? In a lot of cases, they are also trying to take a chunk of all that some families have left to their name. In my particular case, my ex wife was being charged 29%pa because she was deemed a risk because of only being able to repay minimum after losing her job. This was despite no missed payments with anyone. When she contacted the company involved to ask for a reduced rate of interest during her unemployment they REFUSED saying they were "contractually obliged" to charge that rate of interest.

So if your point of view is that these shysters are due their money after, probably, refusing small repayments to hold off on this type of action (and where a lot of other creditors are being helpful) then it gives a huge hint as to why you are desperately trying to persuade people reading this thread that selling your house with a Restriction and not paying the Restriction holder is a waste of time and will never happen any way

However, the real gem in your quote is that "hardly any Conveyancer is willing to bypass a Restriction!" Which means there are some who will and that's all we need to succeed.

Kindly don't ascribe points of view to me that I haven't expressed. What I think about the merits of the underlying debts or otherwise is my business and irrelevant to this thread. If you want to crack on with your crusade against charging orders, go for it and of course there are means by which properties can be sold without paying them, whether restriction or notice. I am merely bringing a touch of realism to your campaign based on actual conveyancing knowledge.