A guide to Charging Orders & Orders for Sale

[sequenci]

Sorry my bad! (my turn)

 

Haha

[phatram]

Our house is now up for sale as we want to move nearer an elderly relative, how does the CO on the property affect us wanting to sell?

[Ganymede]

If the CO is registered as an Equitable Charge then the creditor can block the sale if you don't pay the order in full.

 

If it's registered as a Restriction then you won't need to pay it off and can sell regardless.

[AndyOrch]

Our house is now up for sale as we want to move nearer an elderly relative, how does the CO on the property affect us wanting to sell?

 

Better posting this to the thread concerned (if you have one) or start a new thread phatram..this is the sticky section.

 

Regards

 

Andy

[eggboxy1]

If the CO is registered as an Equitable Charge then the creditor can block the sale if you don't pay the order in full.

 

If it's registered as a Restriction then you won't need to pay it off and can sell regardless.

 

From the Land Registry in response to if a creditor can "block a sale" as you state above

 

"As you mentioned in your earlier post a seller would normally undertake to 'clear' any existing charges, whether registered or simply noted as in the case of an equitable charge.

 

If we received an application to register the sale (Transfer) then we would cancel the noted equitable charge providing we received an application to do so (form CN1).

 

If no application to cancel it was submitted we would simply complete the Transfer and leave the noted charge on the register.

 

So in essence the creditor is not able to object to the sale/transfer being registered.

"

[Ganymede]

From the Land Registry in response to if a creditor can "block a sale" as you state above

 

"As you mentioned in your earlier post a seller would normally undertake to 'clear' any existing charges, whether registered or simply noted as in the case of an equitable charge.

 

If we received an application to register the sale (Transfer) then we would cancel the noted equitable charge providing we received an application to do so (form CN1).

 

If no application to cancel it was submitted we would simply complete the Transfer and leave the noted charge on the register.

 

So in essence the creditor is not able to object to the sale/transfer being registered.

"

 

That's lovely in Land Registry theoretical procedure, but that doesn't reflect the real world.

 

The reality is absolutely zero mortgage lenders would allow an Equitable Charge (EC) to remain on the title register belonging to the former owner and it would be madness for the purchasor to allow the EC to remain on the title deeds of their new property when the debt has nothing to do with them and relates to the former owner.

 

So the Claimant can block the sale if they choose and the only way to get rid of it is to repay the debt or have the Claimant agree to the removal of the EC. I bet you can guess how often that happens in practice!

 

You cannot simply submit a Form CN1 and have the EC removed automatically, you must provide evidence that the interest has come to an end (E.g. that the debt is repaid) otherwise it will be refused by the Land Registry.

[eggboxy1]

I agree regarding if a mortgage was involved with a new buyer; but a cash buyer holds no such obstacle, therefore, a creditor couldn't prevent the cash buyer wanting to (for whatever reason) proceed with a purchase.

 

And I would agree that if there is sufficient equity in the property, upon sale, then a creditor would not remove the charge prior to payment. But if there is not sufficient equity then "in the real world" the creditor would agree to the removal and be repaid what it could get. The reason for this is if they don't, then the owner can simply hand the keys back for a voluntary repossession.

 

If that happens, under the power of sale of the mortgage holder (as first charge holder), then all other charges become overreached and removed to allow the first charge holder to sell the property. When the property is then, subsequently, sold; the remaining proceeds go to the owner as no creditor charges remain on the register.

[Ganymede]

Even a cash buyer wouldn't buy a house with a charge registered on it for someone else's debt.

[eggboxy1]

Even a cash buyer wouldn't buy a house with a charge registered on it for someone else's debt.

 

That's an opinion and nothing to do with a creditor having the ability to "block" a sale if not repaid in full which they don't. Mortgage company's mat not lend and cash buyers may be deterred, but that if for them to decide not the creditor.

 

A lot of cash buyers are also builders looking to renovate. If they purchased the property at a reduced rate as the owner was in financial difficulties, a small charge not attracting interest would be seen as an expense of the purchase so wouldn't be a problem.

[Basil Fawlty]

Can someone just clear something up please. Surely the debt ''belongs'' to the original debtor or are you saying that if a person buys a house with a charge on it (which is the seller's debt), that buyer now becomes liable for the debt?

[AndyOrch]

The debt belongs to the debtor...but its secured on the property by the CO (that stays with the property until settled)

[Basil Fawlty]

I can understand it with a full charge, but with a restriction too?

[AndyOrch]

Full Charging Order or K Restriction...it stays on the property until its dealt with..settled or sold.

[Basil Fawlty]

I've just seen this on another forum regarding someone who successfully sold his house with a restriction on it and after informing the creditor the restriction disappeared. This was part of the information he received from the Land Registry:

 

"As such providing your solicitor provides a certificate confirming this then the terms of the restriction are complied with.

 

The restriction(s) would then be removed when the transfer (sale) is registered which overreaches the interest protected by the restriction. "

[eggboxy1]

As Andyorch said, dealt with - a Frorm K only requires the buyer to provide the Land Registry with notification it has informed the Restriction holder the property is being sold to be removed, settled - you pay off the debt and use the appropriate Rx form to remove the Restriction or sold - if joint owners sell to a third party for "valuable consideration" the Restriction is automatically removed as it is then overreached.

 

You must remember it's not that the Charging Order is Full or Final it's what it is made against that counts. For a sole owner or joint owners who both owe the debt, then the charging Order is made against the land and becomes Equitable. But where the property is owned jointly and only one of the owners owes the debt, then the CO is made against the debtors Beneficial Interest (equity). This is far different and and the CO cannot be registered as an Equitable Charge on the LR deeds. It's therefore far easier to get shot of.

[Basil Fawlty]

Thanks eggboxy1, this is what I was trying to get to, the difference between a charging order and a restriction against a single debtor/joint owner... so in fact with a restriction when the property is sold, the restriction drops off and an unsecured CCJ remains.

[eggboxy1]

Yes, but you will get resistance from mortgage lenders and conveyances who don't understand the difference when you sell. So you need to do some research on your Solicitor if you are selling with a Restriction.

[Basil Fawlty]

Absolutely, this is what I've found from others who are selling with a restriction, but one or two have been lucky enough to find solicitors that understand it and have been able to sell with no problems.

[Guest]

some formal info, updated 2014

 

https://www.gov.uk/government/publications/charging-orders

 

https://www.gov.uk/government/publications/notices-restrictions-and-the-protection-of-third-party-interests-in-the-register

[AndyOrch]

From April 2016 the rules changed again the process of obtaining a charge. What is the main difference now Pls?

 

There are three key differences:-

 

An application for a charging order with respect to a judgment made in the County Court will need to be made to the County Court Money Claims Centre;

 

Where an application is made to the County Court Money Claims Centre it will be determined by a Court Officer; and

Where an application is to be determined by a Court Officer this will be an administrative action and a hearing will not be listed.

 

Under the previous rules, applications were sent to the County Court where the judgment was made, and determined at a hearing by a district judge before the claimant and whichever other party who saw fit to attend. Under the new regime, if the County Court Money Claims Centre receives an objection to the application, the matter will be transferred to the local court of the judgment debtor and the process will essentially revert back to the old regime, whereby the application will be determined at a hearing by a district judge.

 

Other changes:-

 

Slight amendments to the charging order application forms (N379 and N380);

responsibility to serve the application on the judgment debtor being transferred from the court to the judgment creditor; and a new requirement to serve the application not just on parties which have an interest in the property but also the spouse or civil partner of the judgment debtor – if known.

 

Hearings will still be listed to determine applications which are required to be issued outside the County Court Money Claims Centre, such as those referring to judgments made in the High Court.