A guide to Charging Orders & Orders for Sale

[Guest]

as posted by mike770

http://www.oft.gov.uk/news-and-updates/press/2013/03-13

[eggboxy1]

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

[/url]

 

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.
  

 

[Guest]

thanks for that info eggboxy, useful

[mercyblue]

So viewing that caselaw quoted this would seem to say if I had a charging order they wouldn't be able to obtain an order of sale unless there was sufficient equity to pay the mortgage off and the charging order?

I know that a possible defence against an order of sale is insufficent equity - notwithstanding that it would be daft to be taken to court be these leeches when they wont see a penny but often common sense with these companies go out of the window.

Furthermore is it also possible that the mortgage company could oppose an order of sale n the basis that the house is in negative equity and they wont see their money back either?

[citizenB]

So viewing that caselaw quoted this would seem to say if I had a charging order they wouldn't be able to obtain an order of sale unless there was sufficient equity to pay the mortgage off and the charging order?

I know that a possible defence against an order of sale is insufficent equity - notwithstanding that it would be daft to be taken to court be these leeches when they wont see a penny but often common sense with these companies go out of the window.

Furthermore is it also possible that the mortgage company could oppose an order of sale n the basis that the house is in negative equity and they wont see their money back either?

 

Yes, I think the final scenario would apply to you mercyblue... I agree that it makes absolutely no sense at all to force a sale in the event that there would be no funds for the Judgment creditor once the mortgage provider had been repaid. !

 

x

 

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.

 

[ronnie11]

This may have already been answered but can a 2nd charge on a home become unenforceable if one of the parties having an interest in it didn't obtain independent legal advise before signing a postponement document (and also have evidence to prove it) ?

[sequenci]

This may have already been answered but can a 2nd charge on a home become unenforceable if one of the parties having an interest in it didn't obtain independent legal advise before signing a postponement document (and also have evidence to prove it) ?

 

Potentially. Look up RBS v Etridge.

[eggboxy1]

The Land Registry have just produced a new Practice Guide 76 regarding Charging Orders HERE

 

Of particular interest is Section 5 which at paragraph 3 reads,

 

"Entry of a restriction does not protect the priority of the interest to which it relates for the purpose of s.29, LRA 2002. A charging order affecting only the beneficial interests under a trust is liable to be overreached along with those interests by the operation of ss.2 and 27, Law of Property Act 1925. Accordingly, a Form K restriction will be usually be cancelled automatically, without application, when a transfer which appears to overreach the beneficial interests is registered."

 

Which information will, hopefully, a) be of use to sellers when conveyancers are telling them that the CO related to the Restriction has to be paid off prior to any sale being completed and b) eventually deter creditors from going down the CO route (if it can only be made against Beneficial Interest) as it will come to be seen as an ineffective debt collection method with poor security.

[lindyhop]

Hi

just so that i am clear on the issue of sole owners. if selling, any outstanding CO debt has to be paid off prior to the sale being completed or does the CO debt come out of the sale proceeds after any remaining mortgage is paid?

 

sorry to butt in

[eggboxy1]

Yes that's right, mortgage first then CO,s in order or date registered. But if nothing left to pay after mortgage not a lot they can do.

 

Hi

just so that i am clear on the issue of sole owners. if selling, any outstanding CO debt has to be paid off prior to the sale being completed or does the CO debt come out of the sale proceeds after any remaining mortgage is paid?

 

sorry to butt in

[lindyhop]

so sorry eggboxy1

 

im even more slow than normal today. does the CO come out of the sale proceeds then?

 

Thanks

[citizenB]

so sorry eggboxy1

 

im even more slow than normal today. does the CO come out of the sale proceeds then?

 

Thanks

 

Yes, that is my understanding. So if the mortgage takes all the sale proceeds the charging order would be left empty handed.. which seems to be a bit of an issue !

[eggboxy1]

It's my understanding, too. Although I'm unclear if the CO holder is able to block a sale in these circumstances if, either, the property is being sold at under market value (eg: to a relative) or they want the sale to happen in the future when property prices may increase and allow them to be repaid? However, if the property is sold the underlying CCJ will still be in place which still allows other enforcement methods to try to recover the debt.

[sequenci]

It's my understanding, too. Although I'm unclear if the CO holder is able to block a sale in these circumstances if, either, the property is being sold at under market value (eg: to a relative) or they want the sale to happen in the future when property prices may increase and allow them to be repaid? However, if the property is sold the underlying CCJ will still be in place which still allows other enforcement methods to try to recover the debt.

 

As the CO owner has a legal interest in the property they can block the sale, it would then down to the courts to decide whether or not allowing the sale is 'just and reasonable' - well that's how I understand it

[eggboxy1]

For anyone interested, there is now detailed confirmation on the MSE "Charging Order The Myth" site of a property being able to be sold without the creditor with the CO on Beneficial Interest being paid from the proceeds of the sale. If you look for the posts.of Brightonian you will see what was required to enable this to happen. It wasn't all plain sailing as there was initial Solicitor resistance. But through persistence he has managed to achieve what has long been understood in that there is no legal or automatic right of payment to the creditor upon a sale as there is only a Restriction of notification to deal with on Jointly Owned Property where only one of the owners is the debtor.

Edited July 6, 2013 by eggboxy1

[Guest]

just to note re matters after the coming into force of s93 Tribunals Courts and Enforcement act, re where there is an instalment order in place, where s93, 3, 4C (amending the Charging Order Act) states that 'The charge may not be enforced unless there has been default in payment of an instalment under the instalments order.' subject to 4D

Edited July 16, 2013 by Ford

[eggboxy1]

When someone's property becomes subject to a charging order, the beneficiary of the charging order has the right to get paid first when the asset is sold. Any money which is leftover goes to the owner. Of course your ex's creditors can only charge his share of the property and not your share of the property.

.

 

 

 

I understand this to be the case if the property is solely owned but, as far as I can see, there is no legal obligation placed on the seller of a joint property to settle a charging order on Beneficial Interest from the proceeds of a house sale. As it hasn't attached to the legal estate it can only be notified by a Restriction which is a "reminder" the debt exists. It doesn't, however, place any definite obligation of settlement upon the seller or their conveyancer.

[Old Cogger]

copy of that Rule would be useful?

[sequenci]

http://www.landregistry.gov.uk/professional/guides/practice-guide-76

[Old Cogger]

what proceedure to get ristriction off Land registry on selling a house as the other sides solicitor wants one removed before completion, it is a joint account but is only a restriction on partner, seems to me that I am going to suffer as an innocent party, which in law seems to be wrong as I see it, I will be prejudiced by this??

[eggboxy1]

As Sequenci points out, the LR PG 76 (Section 5 para 3) states that the Restriction will become overreached and automatically removed without application if the property is sold for value by the owners to a third party.

 

You need to get your Solicitor to earn his money by pointing this out to the buyers Solicitor that this will be the case. There are instances now arising where people are selling up without discharging the CO simply because it is a choice as also pointed out by the Land Registry in Landnet 19 (pages 16/17);

 

“Although generally a claim against an equitable share cannot be protected by restriction, the Land Registration Act 2002 expressly provides that for the purposes of entering such a restriction, Land Registry may treat someone entitled to the benefit of a charging order relating to an interest under a trust as if they had a claim against the trust property itself. This does not however entitle the judgment creditor to enter a restriction that would interfere with the ability of the trustees to overreach interests under the trust. We regularly have to reject on this basis applications for restrictions where judgment creditors have sought to prevent the registration of any disposition without their consent. The strongest form of protection that we are likely to approve follows the wording of Form K, which is set out in schedule 4 to the Land Registration Rules 2003 (which means the creditor cannot "block" a sale as some people believe)

An applicant seeking to register a disposition can easily comply with this restriction by sending a notice to the address specified and supplying the necessary certificate. The purpose of the restriction is not to prevent a disposition from being registered. (which is what should be pointed out to buyers conveyancers) It should however ensure that the judgment creditor is informed that a disposition has taken place so that they may try to recover payment out of the proceeds held by the trustees. The restriction will also ensure that the trustees or their conveyancers do not overlook the existence of the charging order when they decide how to apply the proceeds.” (meaning they have a choice not a legal obligation)

[sequenci]

As Sequenci points out, the LR PG 76 (Section 5 para 3) states that the Restriction will become overreached and automatically removed without application if the property is sold for value by the owners to a third party.

 

It just need the money to be paid to two people, isn't that the case? (not sure if anything has changed recently)

[eggboxy1]

Hi Sequenci

 

 

We did have this little "discussion" previously (if you look back you said you'd had a bad day so hope it's not the same again!)

 

 

But it's two or more people who need to be the sellers and not buyers as they will have the "benefit" of being "joint owners". Hence the CO cannot then be attached to the legal estate as it would with a sole owner.

 

 

It makes no difference if the sale is made to either a joint or a sole purchaser as the third party.

[sequenci]

Hi Sequenci

 

 

We did have this little "discussion" previously (if you look back you said you'd had a bad day so hope it's not the same again!)

 

 

But it's two or more people who need to be the sellers and not buyers as they will have the "benefit" of being "joint owners". Hence the CO cannot then be attached to the legal estate as it would with a sole owner.

 

 

It makes no difference if the sale is made to either a joint or a sole purchaser as the third party.

 

That's what I put, the money has to be paid to two people - e.g. the sellers

[eggboxy1]

Sorry my bad! (my turn)