further info re above post, the MoJ have decided on the threshold re orders for sale at £1,000! etc

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In the consultation paper the MOJ stated that there was now "Case Law" that prevented the sale of family or primary residencies. In response to my request for the relevant cases concerned they replied with the following details;

We spoke earlier on today. You wanted to know about the case law in existence that provided added protections to defendants facing Order for Sale. I have attached our 2010 consultation which was published under the previous Government. Page 10-11 provides the case law referred to. In summary -

• Caselaw - 'Mesher' type orders – provides protection as long as a minor is resident at the property concerned. The use of such orders was confirmed by a ruling in the case of Harman vs. Glencross 1986. Further powers are provided in the Trusts of Land and Appointment of Trustees Act 1996.
  
• Caselaw - Royal Bank of Scotland vs. Etridge 2001 - This case established the precedent that, where a joint loan has been taken out by, with a jointly owned property as collateral, such as the matrimonial home, it is incumbent on the lender to explain to all lendees at the time of signing the potential consequences of default. In this case it was ruled that one party had signed the forms without being informed by the lender of the possible consequences and that the Royal Bank of Scotland did not have the legal right to enforce by way of charging order.
  
• Caselaw - Bank of Ireland Home Mortgages vs. Bell 2001 - This case established the circumstances in which an order for sale would be granted, even if it concerns a family home. The equity available on the property must be sufficient to pay off the judgment creditor and all other interested parties and still leave enough money to adequately rehouse the debtor and dependants.
  

Yes they do (but then they also agree with me that CO's are unfair) but it's an assumption not based on what the creditors were protesting about. The lenders never threatened to start pursuing bankruptcy, they just threatened to rethink their "lending policies". They threatened that if CO's were removed that they would,

"...either move towards lending on a secured basis only; or they would substantially raise interest rates on unsecured lending to make provision for the increased number of 'bad debts' that they would be unable to effectively pursue".

Now given you have let us know just how easy a creditor can gain bankruptcy; why would they feel they couldn't pursue debts without a CO? And don't forget they can't pursue CO's on the huge amount of customers they have who aren't householders. Perhaps its because that is an option the vast majority of creditors just wouldn't pursue on unsecured lending? The MOJ also stated regarding CO's that,

"A decision to lend to an individual borrower should be based on an assessment of that borrower’s creditworthiness and ability to repay, rather than the possibility of securing the loan by means of a charging order if the debtor defaults. Furthermore, most lenders charge a premium on unsecured lending as compared to secured loans, reflecting the increased risk (arising from the absence of security)."

So it's clear they don't like CO's and, as they state in the paper, they think they are unfair. But despite this thinking, they still bottled the OFT's recommendation of a much higher limit and caved, I believe, because they fell for the same assumption (fear) Sequenci is concerned about. But it's not an assumption based on the facts of what, either, creditors currently do to chase the majority of their debtors or what they threatened to do if CO's were removed.

There's no point missed I just don't share the opinion, for the reasons I have given above, that bankruptcy will be the preferred option for creditors with a higher threshold on Charging Orders.

Tell a creditor that they cannot get a charging order for a debt of less than, say, 10K and all of a sudden bankrupcty for those with equity in their properties becomes much more attractive.

Your a), b) & c) reasons as to why creditors go after CO's are reasons why creditors go after CO's; but you're assuming (wrongly in my opinion) that they are also why creditors presently go for CO's in preference to bankruptcy proceedings. When a creditor is denied the CO option he is also denied the economy of a), the benefit of b) and then has to confront c) - those are the reasons, I would suggest, that the overwhelming majority of creditors steer clear of bankruptcy proceedings altogether whether there is a CO option on the table or not. It's an easy thing to believe that if you take away CO's then bankruptcy will be a preferred choice, but that thinking totally ignores the way creditors need to behave as businesses. When debts as large as £20,000 are being handed straight over to DCA companies to deal with (not even getting to the CCJ stage) then it has to be understood that those decisions are being taken for economic and business reasons that are for the benefit the creditor not the debtor. If the majority of debt progressed to a CCJ stage then I would have a different view, but as they don't and even CO's are fairly arbitrary, then I just don't see the logic that bankruptcy will be sought more often (given these facts) if a CO is not available.

And as for your distaste for charging orders on unsecured lending, what do you think would happen if they were prohibited? Answer: unsecured lending would be harder to get and more expensive. The availability and pricing of unsecured lending is a factor of the access to charging orders in default cases.

That doesn't really make sense as you don't have to be a householder to gain unsecured lending. However, an example of why I have such distaste for CO's on unsecured lending can be found on Barclay's website. In answer to their own question "What is an unsecured loan?" there explanation is as follows;

"Unsecured loans enable you to borrow money without offering up security based on a major asset, like your home for example"

Put it this way, what do you honestly think will happen if CO's were made more difficult to obtain by lenders, what would they do instead?

Much the same as what they already do to those debts they don't currently pursue to the Charging Order stage. To understand why, in my opinion, that would be the case you need to ask yourself why more CCJ's (and subsequent CO's) aren't already sought by creditors than are at present? The answer is simply time, business economics and (possibly) reputation .

Gaston explained in post #120 how easy it is for a creditor to gain a bankruptcy order with the sale of the property being a "slam dunk" (as he so eloquently puts it) but it only addressed the ABC of how a bankruptcy order works. What it failed to factor in is why, given the ease and apparent zero cost option, there hasn't already been an explosion of bankruptcy's already? That CO's are available isn't the answer because why would creditors currently pursue a CO (and then have to wait God knows how long for the return of its money) when a simple bankruptcy order would do the trick in a flash? It's because there are other factors that have to be taken in to account for a business and bankruptcy, despite Gaston's Utopian view, is financially risky and costly to pursue.

A creditor will consider the interest already earned/ the write off and tax deductible bad debt allowance plus a sell off amount to a DCA before he he even decides to go after a CCJ let alone a CO, so bankruptcy will be way down the agenda. Suing somebody takes time, effort and money and if the previous considerations look agreeable then a business won't spend time and money chasing a debtor if it only stands to gain an unknown quantity from doing so. This is why Debt Collection is outsourced simply because its more efficient and cost effective for the banks to do so.

This doesn't mean that there will be NO bankruptcy dealings by creditors it just means, IMHO, that the factors that have governed a creditor deciding to pursue bankruptcy would remain the same and the stats will, therefore, still remain the same. A CO has largely been a shot to nothing for the creditor as the courts give them away so freely; the removal of such wouldn't alter the bankruptcy factors just the ability for creditors to gain a CO and the one isn't connected to the other (although its easy to think that and expect creditors to say they are that to keep the easily gained CO's in place!)

Reputation has to, also, be considered. From the people I deal with not one of them knew what a CO was before they fell into debt and were threatened with one. To me they are the credit industry's dirty little secret and I should imagine they would want to keep it that way. But ask these same people if they know what bankruptcy is and you will get a totally different response. If bankruptcy, therefore, started happening en masse and people started to understand that they could be made bankrupt and lose their home if they couldn't pay their credit card bill; then it would begin to send shock waves that the Government simply wouldn't be able to ignore.

(And yes, it is good to exchange differing views!)

We've seen trends with certain DCAs (and mainstream creditors). Take Lowell, for example. They've massively increased their use of stat demands AND bankruptcy petitions, thus every time one is sent it must be assumed (so long as the debtor is in mortgaged accommodation) that they mean business. ]

I understand what you say above, but you can't let the whole picture be skewed by one creditors actions. Of the people I deal with, MBNA are by far the worst of creditors I am notified of who are trying to obtain a CO and the percentage of women they target is massively higher than that of men. But, again, I couldn't assume this is the norm across the board without the data to back that up.

And whilst TLATA and other case law protects family and main residential homes from an OFS, it doesn't protect people from have "security" gained over their property for an "unsecured" loan which, as I point out above, even the Government accept is unfair.

It's based upon anecdotal evidence, I work very closely with many of the national debt advice charities, the government and the Insolvency Service. We're seeing an upward trend. Well, at least we *have* been.

I understand your concerns, but it plays into the creditors hands to put forward the belief that we would definitely see Bankruptcy more often if the facts don't actually point that out. I also, now, work part time for a debt charity and in the last six months I have seen a dramatic fall off in creditors going for CO's and I've encountered no one having to deal with Bankruptcy for consumer debt. But I would not use my personal experience as a basis of it being the norm unless I could see it verified across the board.

However, the Insolvency Service stats HERE do show that bankruptcy rates were falling up to the second quarter of 2012. Are you saying that's dramatically changing? Because one of the factors for the decline is the amount of DRO's being sought. But I do agree bankruptcy is way more expensive and the "bean counters"working for the creditors will take this into account when deciding whether to sell off the debt or pursue it through legal channels. I just disagree that bankruptcy will suddenly rise with a high CO threshold.

Sequenci - Unfortunately, if your view is based solely on you own experience it can only be an assumption until you have the complete data to back it up.

Take Gaston's post for instance, regarding Bankruptcy by a creditor he states,

"It's ideal for the smaller debts as getting an order for sale will be next to impossible, but a bankruptcy order - followed by a sale of the property by the trustee - is a slam dunk. That's basically why a modest limit on charging orders has been implemented - to stop an explosion in bankruptcies."

Its easy to assume from that statement that the "modest" limit is, indeed, to stop the "explosion" in bankruptcies". But until recently there hasn't been any limit, modest or otherwise, on CO's - so why hasn't there been an bankruptcy explosion previously given how ridiculously easy Gaston says it is? The answer, IMHO, is because Bankruptcy is a far more involved process for the creditor and most would shy away from this step as, indeed, most shy away from trying to secure CO's.

A number of creditors are switching their strategy from charging orders to bankruptcy.

Evidence please.

If they were made any more difficult for creditors to obtain we will see a MASSIVE increase in bankruptcies being applied for..

Forgive me, Sequenci,, but I feel this a total red herring as there is absolutely no evidence to support this is what would happen with a threshold on CO's. It's just an assumption that isn't really backed up by facts.

The reason Charging Orders are sought, primarily, is because they offer priority to the creditor over the debtors other creditors at a fairly cost efficient price. Bankruptcy does not guarantee the creditor any priority (as all debts are included) so its a far riskier and involved strategy for a lot larger outlay. Altering CO thresholds won't affect that fact. What thresholds would do, I believe, is to see creditors writing off the debt for tax purposes and selling off the debt for debt collection (as happens with the majority of bad consumer debt anyway) as its a better "business" solution than going for bankruptcy (part of the "business" reason being the high interest rates these loans have attracted!)

With regard to the opinion of the "unfairness" of CO's on consumer debt; even the MOJ is in agreement that they are. In their proposal paper regarding introducing threshold limits for CO's they state;

"Option 4: Introduce a minimum threshold on all orders for sale in Consumer Credit Act applications

Introduction of a threshold would remove the threat of eviction from thousands of debtors with charging orders. It would also reduce the ability of aggressive creditors to threaten and intimidate debtors who have already paid higher premiums for what they believed to be small unsecured debts. Using rules to specify that the threshold only applies to consumer credit debts would tackle the chief unfairness that people can lose their homes for what was originally unsecured borrowing but ensures that orders for sale are still available as a tool for individuals seeking to recover larger debts through the civil courts."

I've recently read the MOJ paper that outlines why it is recommending a threshold limit of £1000 for debts able to be pursued by a CO (instead of the £25,000 recommended by the OFT) and, whilst it refers to the benefit of high interest rates creditors have under the unsecured banner, it still ignores the unfairness of the creditor being able to also gain "security" for the debt later on with a CO.

Hopefully, the OFT is as unimpressed as I am over this £1000 limit and is seeking other ways to restrict creditors pursuing CO so easily?

Hallmark

The Land Registry shouldn't need this explaining but its notified HERE at Section 2 in their Practice Guides

Hallmark

The Land Registry's own rules amended in 2003 state that an "Equitable" charge is not allowed to be made on jointly owned property if the Charging Order is only against one of the joint owners. The person with the benefit of the CO can only register what is called a Restriction to notify that a CO on the "Beneficial Interest" (equity) of one of the owners has been made. So you need to ask the LR why they are allowing something that is against their own rules?

If that is the case then you should inform the Land Registry immediately as your Ex's debt affects your share of the equity upon sale if the CO is left registered at the LR on an equitable basis.

It's not a Restriction as it states that an "Equitable charge" has been created.

This is only allowable if the debt is in joint names, too. If it isn't then there has been an error and you need to inform the Land Registry of such.

Think we could safely assume that it does otherwise the mc wouldn't have full security on the property??

Whilst I agree it's unlikely (but it is possible and HSBC do such a product) as the difference between joint and sole ownership is so crucial its worth clarifying.

Am afraid that doesn't really mean anything its states only likely and would seem to be really referring to houses with children in them etc

The assessment states that case law exists against OFS's being granted on family or primary residencies (so it covers both) It states its only likely an OFS would be granted against shares, unit trusts or secondary properties or land. I'm not sure why you feel an official MOJ document stating these facts doesn't mean anything?

Tell it to Cabot who when you ring them one of the options press "x" for - is if your calling about an order of sale, why would they have that as an option if it was such a rare event.

As Official Court statistics reveal that only 3 in every 1000 CO's granted ever progress to an OFS stage (that's progress not granted) I think we can assume the rarity. And as I said before, you shouldn't ring a creditor you deal with everything in writing!

I am trying to put across the more negative side. I know I only avoided an application for an order of sale because I had a clause written into the charging order.

I think a creditor trying to put a CO on your property is all the negative a debtor needs. What is more helpful to them is to explain that a CO is not the massive problem it first appears when a threat first arrives on your doorstep.

eh yes he has stated its in his name if you read post 22.

Double checking as saying mortgage is in his name doesn't mean the property is registered in his name only.

Secondly what case law do you mean that you cant apply for an order of sale on the basis that its somebody's main residence? The owners children in the house would preclude any order of sale been made but as the poster mentions his daughter selling her car so this appears not to be the case here.

Ministry of Justice information HERE Section 3.1 second paragraph.

However you could consider a voluntary charging order with a clause written in to it that they cant apply for an order of sale

Also from Post #22 -

we owe about what the house is worth on a good day and the DSS pay interest only on the mortgage

A Charging Order under these circumstances would be worthless so let them pay for the privilege if they are that stupid to go after one (which they aren't).

First off, you must stop talking to them on the phone as a company like DLC will see this as a good sign you are wriggling on the hook and that they can extract a high amount out of you. You tell them from now on you will only correspond in writing.

Secondly, DLC will have bought this debt for a fraction of its value (usually around 10%) so if you still want to negotiate a F&F settlement you need to make sure you factor this information into your offer.

You haven't, however, stated if your property is single owned or jointly owned? As I explained above that will make a big difference to your situation.

Terence123

Firstly, you aren't going to lose your house if a Charging Order is granted as it is your main residence and there is now case law that prevents an enforced sale under these conditions. So don't worry on that matter.

The implications regarding Charging Orders also depend on a couple of factors; the first being if your house is registered in your sole name or if it is jointly owned with your wife. If it is registered in your sole name then the Charging Order is "charged" against your Land (or property) and is required to be paid off when you sell the house, out of the proceeds of the sale, or the Land Registry will block the sale by not allowing a new owners registration.

If the house is jointly owned, however, then a Charging Order is quite different in that the Charging Order is made against the debtors "Beneficial Interest" (or their share of any equity in the property). Under these circumstances there is no legal requirement to pay off the debt from any proceeds from a house sale if you sell your property and the Land Registry is not prevented from changing the details of ownership. Therefore, this type of Charging Order is very weak security for the creditor who has taken steps to secure a Charging Order (but only if the debtor is armed with this information and have a look here for some more info MSE)

A couple of words of caution, however; if you are taken to Court regarding a CO then you need advice to ensure that Interest is not added to the debt by the Judge (its not allowed on Consumer Credit debt but many don't know the law on this!) You won't (or are extremely unlikely to) prevent a Charging Order but seek advice from Sequenci on here if it gets to that stage.

Birdy99999

Just so you are aware; my beef on CO's is not as across the board, it's in the instances where they are used by creditors for "unsecured" loans where creditors can gain "security" (by way of a CO) for their loan defaults. As they have already benefitted from being able to charge hideous amounts of variable interest on the loans (often upward of 30%) as the loans were sold on an "unsecured" basis; to be able to put those who have been unlucky enough to default through the misery and fear that they may then lose their house is, to me, totally unfair given the absence of the "Your Home may be at risk etc..". Remember the overwhelming vast majority of borrowers don't default, so these companies are still raking in huge profits from those customers on the back of the unsecured banner.

And though I'm not a 100% cetain what your question is above, all I can really say is that if a person enters a contract on the understanding of what will happen if they don't repay; then they can't really be surprised at action taken against them when they then don't pay?

Hi Egg,

 

Could you point me in the direction of the caselaw that prevents an OFS application off the back of a Restriction.

 

Many thanks.

Here

Section 3.1 Paragraph 2

There is only one type of Charging Order but it's what asset the Order is made against that differs. If you were the sole debtor and sole owner of your property, or you were a joint debt debtor and joint owner of the property, then the Charge is made against the Land (property) and is an "equitable" charge like a mortgage and has to be paid off similarly (if funds allow) when the property is sold.

If, however, you are a sole debtor but joint owner of the Land (property); then current rules state that the CO cannot made as equitable charge but, instead, is made against your "Beneficial Interest" (your share of the equity). So there is no actual "Charge" on the Land (property) itself just any realiseable financial interest you may have in it. The Charge is then notified on the Land Registry by a Restriction (Form K) which only states that a seller must notify the Restriction holder when a sale is made. There is no obligation on the seller to pay off any Charging Order at this time.

A creditor can still, technically, attempt to gain an Order for Sale as he has a Charging Order, but there is now case law against a sale being made in these circumstances which makes them rarer than rocking horse doo-doo.

I am surprised your buyers side didn't request the Restrictions removal, but its good to know of a case where the facts are explained to the seller by a Solicitor being paid to act in that sellers interest; and not just give away thousands of pounds of clients money when there is no legal obligation to do so.

Advised by who, though, birdy, another Solicitor?

The reason I asked the question is because there is "resistance" in the conveyancing community to explain to sellers that, if they have a Charging Order on Beneficial interest only notified on the Land Registry by a Form K Restriction, there is no legal obligation to pay the CO notified. You only have to notify the Restriction holder that the house is being sold. There is no Equitable Charge to pay off in these circumstances.

The notification given when selling is supposed to give the Restriction holder opportunity to lay claim on any money going after the sale (backed by the CO). But what's been happening is Solicitors have automatically been paying off the CO's notified by Restriction largely (it would appear from posters experiences) through ignorance of the rules and regulations surrounding CO's. So people like Northern Rock have had it easy as they haven't had to do anything to reclaim any money. But a "strongly worded" letter is about all they have left if they don't get paid by a clued up Solicitor as in your case as the Restriction is cancelled by the Land Registry when you sell for value and you have complied with the terms of the Restriction (ie notifying the holder you are selling.)

But even if a seller with a Restriction has a clued up Solicitor, resistance is still usually found from either the buyers Solicitor or the buyers mortgage lender asking for the Restriction to be removed prior to the sale proceeding. Did this happen at all?

birdy999

Interesting information. As has been mentioned on CAG and elsewhere, there is no legal obligation to repay a CO under the circumstances mentioned above.

However, there are several negative views on this board that current "conveyancing practices" overide this option as Solicitors aren't giving their clients the option of non payment.

Can I ask how your buyers solciitor reacted regarding the Restriction being removed for his clients?

The judge got the law wrong. It simply cannot be applied post-judgment on CCA debts at all. It's prevent as per The County Courts (Interest on Judgment Debts) Order 1991 - Section 2(3)(a) .

If it is law that Statutory interest cannot be added on CCA debts, how do debtors go about getting the interest removed where a Judge has added it?

Would there be milage in issueing a counterclaim as part of any ICO proceedings for the interest differential between a secured and unsecured loan?

It would certainly be interesting to see what outcome a claim of that sort reaped?

A product that sets rates based on risk that, subsequently, has that risk removed; certainly needs to be tested as to it's fairness.