Restriction K's

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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.

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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)

Edited June 6, 2011 by eggboxy1

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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.

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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.

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"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.

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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.

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There are no points of view ascribed to you that I have expressed as yours; I asked "if" they were. I would imagine, however, that your protestations leave little doubt as to your true feelings on this matter to anyone reading this thread.

 

And trying to claim privacy regarding those feelings on the matter after making the statement;

 

"And, actually, what's the point when you will still owe the money afterwards anyway?"

 

is a little like trying to shut the gate after the horse has bolted isn't it?

 

Your claim, too, about "realism" coming from your knowledge of conveyancing smacks more of self interest, to me, rather than helpfulness. You just seem a little too concerned people might actually follow what they are legally able to do and succeed? Very strange?

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"Yep, the interest rates are so high for products like those because the payers subsidise the non-payers."

 

That's understood when you pay 12.9% for "unsecured" instead of 5.9% "secured" but how can they justify 30%?

 

"Unfortunate for those who own property because they have no choice but to pay if they get a charging order"

 

That was the, perceived, opinion but, thankfully, the power of the Internet has shown people that doesn't have to be the case with CO's (despite a bitter few who are desperately trying to maintain the status quo)

 

"Guess the lesson is always to take a secured loan over an unsecured one if possible."

 

Secured loan - lose house

Unsecured loan - don't lose house

 

............Mmmm tricky one?

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Hi shazzyball,

 

First of all stop worrying as all the creditor is doing is going through the motions of trying to gain some priority for his debt. But if, as you say, you are close to negative equity then they are chasing nothing anyway.

 

It's virtually impossible to stop a Charging Order but, if the house is in joint names and the debt is not against you, the CO will only be made against your other halves "Beneficial Interest" in the Property. The Creditor cannot try to claim anything of your share if you are not part of the debt.

 

Also, in the above circumstances, all that can be registered on the Land Registry Title Deeds is a "Restriction". All this means is that a Creditor has to be notified when you sell the house but please note: IT HAS NO LEGAL POWER TO FORCE YOU TO PAY THE CREDITOR.

 

And whilst Charging Orders are virtually impossible to stop, a creditor gaining a "forced sale order" is virtually impossible to gain also. The Court have very little choice but to grant CO's but they have much wider powers to deny a "forced sale" (only 0.3% are ever granted which is why creditors don't waste money going after them)

 

Like a lot of people (and there are a lot of people) you have been led to believe by the creditor that you will lose your home if you don't pay more. So understand the type of people you are dealing with, ok! That won't happen and the only way you ever will lose your home is if you, unfortunately, can't pay any secured loans against the property (ie the mortgage)

 

Have a read on "Charging Orders the Myth" on the moneysavingexperts website as it explain a few things that will, hopefully, put your mind at rest.

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cymruambyth

 

I did say "virtually" impossible stop and I'm certainly not advocating people giving up attempting to try and stop a CO. I'm just reflecting the stats on how many people actually succeed (but great that you did and you should post up or link to how you succeeded stopping the CO to help others defending)

 

Cadbury 1879, however, exposes the greed and mentality of these type of creditors; so don't feel obliged to pay anything to these people who obtain a CO. Once they take this route my opinion is that they limit their bargaining power on getting future repayments from you. They are not going to get an Order for Sale so what else are they going to do?

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Hi shazzyball

 

An Equitable Charge is usually an indication that a secured loan has been taken out (either more borrowing on the mortgage or a loan secured against your property)

 

Also, while I'm no expert on this, I'm pretty certain a lender would require both parties signatures for a secured loan?

 

Do you know if the Blackhorse loan your other half took out was a secured loan?

 

As regards the information you are being asked for you do not have to supply anything. However, I would suggest you ask them for why they want the information to see what they are up to?

Edited June 24, 2011 by eggboxy1

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cymruambyth

 

I'm glad you managed to avert your CO and it should empower people in a similar position to your self. However, the CO's that I was talking about that are virtually impossible to stop is where the debtor simply cannot afford anything but a token repayment.

 

Many DJ's now won't accept token repayments from debtor's and give impossible monthly amounts to be paid in the Installment Order. As soon as the first payment is defaulted the Creditor moves for a CO; it's these that are virtually impossible to stop.

 

You were correct in successfully applying Mercantile v Ellis to your particular case and I note you state you had a DJ who knew the relevant Law in this area. Sadly, as many, many others will attest on CAG most DJ's have a fairly poor understanding of the CCA and its pot luck who you get.

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shazzyball

 

If you are 100% sure the loan was not secured and also only in your Husband's name; then you need to contact the Land Registry and object on those grounds as it shouldn't have been registered. They will then have to inform you how (or why) it has happened and you can take it from there once you get the info.

 

Also, you need to clarify if Hillsdens (who are a debt collection company) have bought the debt of Blackhorse or are only acting on their half. If Hillsdens say they own the debt they need to validate that fact by providing a letter of assignment from BH.

 

Understand, though, that a creditor gaining a Charging Order has not gained definite security for it's debt! It has merely secured a Court Judgement of that debt. That is why it is still chasing as it hasn't got any real guarantee from the CO of getting any money back. That is why they are still trying to push for a payment off you.

 

However, as I have said more than once on here; my feeling is that once a Creditor goes to these lengths he is a busted flush. Given the "Order for Sale" is a no go, and given you also say you are nearly in negative equity anyway, there is absolutely nothing they can do now?

 

Don't underestimate how low these people will go to put the frighteners on you, however, to pay up and I know it's strange when it first starts to happen. But you can ignore their demands and threats as they carry no weight and once they understand they are being ignored you will see how little they can do now.

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Hi Ganymede

 

I never mind anybody correcting me if I'm wrong but on this I'm not.

 

If you read what shazzyball has put regarding the loan from Blackhorse (on which the Equitable Charge has been made in 2008) she states it was only taken out in her Husbands name. Therefore an Equitable Charge wouldn't have been able to have been registered.

 

However, an Equitable Charge can also be registered for secured loans see here SECTION 3 "Equitable Charges"

http://www.diyconveyance.co.uk/mortgages-other-charges-registered-against-land.html

 

So something is definitely amiss here and that is why I have suggested shazzyball needs to find out "Exactly" why this has happened?

Edited June 25, 2011 by eggboxy1

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shazzyball

 

No problem, we are all in this together!

 

So please report back what the LR says as it helps others who come up against the same problem.

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Hi Ganymede

 

But the point is we don't know if it is regarding a Charging Order as shazzyball has said there is also a Restriction placed, too?

 

The point I was making is you shouldn't automatically assume that an Equitable Charge is only for a Charging Order (or a Secured Loan for that matter) and it's certainly wrong to state it has nothing to do with a secured loan if you aren't certain of the circumstances of why it's there? That's why clarification is required.

 

This is certainly NOT directed at shazzyball but, sadly, there are instances where people don't know that their other half has taken out a loan and added their name to it with a false signature. And there are also instances where people don't know they are signing for a secured loan either. I know, personally, people who have suffered both of the above instances.

 

I'm sure shazzyball will be able to get to the bottom of why the Equitable Charge is showing (wrongly or rightly) and put it right as she is sure on the circumstances of the loan. But she needs to be aware of all possibilities for it's existence and not just some of them.

Edited June 25, 2011 by eggboxy1

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Hi Ganymede

 

It is a strange one and I sincerely hope there is nothing fraudulent about it for shazzyball to have to deal with.

 

Let's hope so!

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shazzyball

 

Nobody is accusing your other half of anything, but you do need to request copies of ALL loan documents from Black Horse to verify 1) there wasn't a secured loan and b) they didn't carry your signature. They will then provide you with the required proof you need to remove the "Equitable Charge" from the Land Registry.

 

Can I just ask when your OH defaulted on the Black horse Loan and also who your second mortgage was with?

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shazzyball

 

Then you do need to sort out what has happened because as Ganymede says, after 2003 it isn't possible to register an Equitable Charge for a CO for a sole debt on joint property. And as you also weren't a signatory on the loan in 2006 (or any other time) then an error has been made somewhere?

 

It's fishy, too, that the Equitable Charge was placed in 2008 when the loan was taken out in 2006? However, I note you say Hillsdens became involved in 2007?

 

I'd have a closer look at this involvement if I were you as the "practices" of Debt Collection companies weren't as closely monitored by people pre recession and it may, possibly, shed some light on the matter?

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shazzyball

 

Cadbury1879 is bang on the money as a Restriction cannot be placed without a Final Charging Order hearing of which you, personally, have to be notified of by law as a joint owner to state any objections or unfairness etc a CO may have. Did you, personally, receive anything from the Court regarding this at this time?

 

A simple phone call to the Land Registry asking how an "Equitable Charge" can have been placed (given your circumstances) may save you an awful lot of time. They will have to investigate the details passed on to them from the Court given you have proof everything was solely in your OH's name.

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shazzyball

 

Ganymede and Sequenci have laid out the reality of an Order For Sale being granted let alone attempted. The fact you are in near negative equity alone means they would be complete idiots to try in this financial climate as they'd waste an awful lot of money for, potentially, no return.

 

And as only 0.3% of CO's ever progress to an OFS (have a read here http://www.shergroup.net/blog/?p=690) you can sleep easy that is not going to happen! The low percentage rate is simply because creditors know it's not going to happen in all but extreme cases (which yours isn't)

 

As I have previously said on this thread, I feel that once the Creditor takes this route they lose any bargaining power regarding repayments as there is now nowhere for them to go and they lose their "fear factor" to gain repayments (I hope your OH had a degree of satisfaction when telling them the £100 offer is no longer available).

 

I know everyone is different and you have to do what makes you feel ok; but my OH has refused point blank to talk her creditor since they gained a CO (Restriction) last year. They tried to phone and then wrote three times asking for payment or "further enforcement action will be sought through the Courts".

 

She continued to ignore them and they haven't been in touch for over six months. We also aren't in negative equity and we don't have any children under 18 at home, either. So stay strong as your circumstances really defeat anything effective they can now do to you.

Edited June 30, 2011 by eggboxy1

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Also have a read here http://www.lawgazette.co.uk/in-practice/benchmarks/proportionate-orders-sale and also the link in there "Charging to the front of the Queue"

 

It's a bit long but it explains why Charging Orders are sought by creditors in the first place (as first come first served!) It also highlights why the creditor is always going to struggle to get an OFS if the debt is under £25,000.

 

Whilst it hasn't been passed as law, the author notes courts are reflecting "the way the wind is blowing" on the unfair proportionality of creditors collecting a debt under this figure, with an OFS, against the debtor losing their residential home.

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GP

 

See Post #11 of this thread and the response I received from the Land Registry Solicitor.

 

It confirms that all is required to comply with the Restriction (and therefore change the LR details upon sale) is for the purchasers solicitor to notify the Restriction holder.

 

But you are right in saying there is legal obligation to pay a creditor who has a Restriction placed.

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GP

 

That is correct, but do expect resistance from some Solicitors many of whom (it would seem) don't seem to understand the changes in the LR.

 

They will try and tell you that you have to pay off the creditor with the Restriction or the sale can't proceed. That, as the LR have confirmed, is not necessary or required.

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shazzyball

 

If selling up and renting reduces your outgoings substantially then it may be a wise move due to your near negative equity (and it certainly reduces creditors options to put any pressure on you) but don't lose heart about your situation if you would prefer to stay put.

 

That is because you should now see that the CO route for creditors is more of a priority move on their debt than an actual move to regain immediate payment. They are now severely limited in what else they can do but wait for any type of payment. You can take advantage of that time to sort out what really is best option for the future.

 

And I agree with what you say regarding the loan sharking rates these companies have been getting away with under the toothless and largely ineffective financial regulatory services in the UK. Not allowing CO's to be granted for debts under £25,000 (as this Government said it would do but then bottled it) would have been a huge help in this financial climate to people in debt struggling to keep a roof over their head. But don't underestimate the power of websites like CAG in empowering people to fight back against these people.

 

And the terms of the Restriction on your house has now been clearly defined by the Land Registry as having 1) no legal weight to enforce payment and (2) a sale to a third party for money cannot prevent the LR details being changed. But you need to make sure your Solicitor understands this fact you will be paying him and he should be acting in YOUR interests and not that of the Restriction holder.