Link Financial Restriction on Property

[michellechick]

My partner has received a letter from Link asking for our permission to register a restriction on our property to secure our debt of over £4,000. They say that if we agree to this then they will accept our offer of £1 per month, not add interest charges and not apply to the courts for an order of sale or possession of our property.

 

My partner has various debts (all of whom we are paying £1 a month) and already has a charging order on the property.

 

Where do we stand? Is this something we should consider otherwise can they take us to court and add charges/interest, etc?

[asokn]

I assume there is already a CCJ in place?

 

If there is then the creditor is entitled to enforce the agreement, reject payment offers and generally make life difficult for you. The effect of the charge would be that Link would be paid from the proceeds of sale of the property before any money came to you (although prepare for another forum member to say that is not the case).

 

Only you can really decide what factors are of greater or lesser importance but this seems like a way of dealing with the CCJ without having to face any intrusive enforcement action.

 

You will get a range of different opinion on this forum regarding charges. I am on the side of them really not being too bad a thing when you consider what the other options for the creditor are. Others here would rather be taken out and shot than have a charge on their property and the majority fall somewhere in the middle. Take the views on board and then form your own conclusion based on your specific circumstances.

[michellechick]

Thank you for your reply.

 

No, there is no CCJ in place. We have been paying Link Financial Outsourcing £1 per month since June 2011 and for them to to continue with this amount they say they need this security. We have informed them that our house is on the market and that as soon as our home sells we will pay them in full. We have been trying to sell our property now for 4 years and have reduced the price quite a few times but no joy. We are currently in the process of changing estate agents and reducing the price yet again in the hope of selling.

[AndyOrch]

No CCJ, no charging order, until they successfully attain one.Keep paying your £1 PM and ignore their request.

 

Regards

 

Andy

[DuffNCustard]

It could be construed that Link are acting unreasonably in requiring this restriciton, in that they are seeking to be treated more equally than your other creditors. Guidelines state that debtors should be treated sympathetically, debtors are required to treat all their creditors even-handedly. Do not concede to their request.

[asokn]

I'm inclined to agree with Andyorch but beware that if they take you to court, get a CCJ and then enforce it with a chargingborder you will find yourself with a charge anyway but not only will it secure the amount you owe but probably a few thousand pounds extra in costs.

 

As Link are accepting £1 without a CCJ it isprobably because you have a property and they know that there is an asset to enforce against if necessary, and of course you have said that you will pay them from the proceeds of sale. As you have said that you are selling the property they probably want a guarantee that they will be paid and a restriction would stop you changing your mind!

 

I have to say that Link do seem to have acted pretty reasonably here and I can see where they are coming from.

Edited April 24, 2012 by asokn

[asokn]

It could be construed that Link are acting unreasonably in requiring this restriciton, in that they are seeking to be treated more equally than your other creditors. Guidelines state that debtors should be treated sympathetically, debtors are required to treat all their creditors even-handedly. Do not concede to their request.

 

Can someone be treated "more equally" than someone else? I can't really see what Link are doing that is unreasonable; they're accepting basically nothing in payment, they're waiting for the sale of the property and not issuing a claim, they haven't petitioned for bankruptcy, they just want some security pending sale and if the OP does indeed intend to pay Link from the proceeds of sale what is the harm of having a restriction in place to ensure that occurs?

[michellechick]

I understand why Link are doing it but will there be any complications with selling whilst there are charging orders on the property? Will the purchasers of the property be notified of these Charging Orders and would that put them off buying?

[AndyOrch]

Are the others Charging Orders or Restrictions Michelle?

 

Andy

[michellechick]

Yes Andy, there is one Restriction already on the property from a Mint loan of £5,000.

Edited April 24, 2012 by michellechick

[AndyOrch]

Before April 2003

 

Once a charging order was obtained against a debtor over his interest in a property, whether he owned it solely or jointly, the charging order was registered as a caution at the Land Registry. This meant that the creditor or his solicitors would get 14 days’ notice from the Land Registry that the debtor and other owner or owners were trying to get rid of the caution, probably with the aim of selling the property. The fact that such notice had to be given meant that a debtor knew he could not sell the property before the creditor knew about it and took steps to

prevent the sale. So the debtor would usually pay the creditor before selling

the property. Cautions which were registered prior to April 2003 still remain effective and the creditor will get 14 days’ notice of any attempt to get rid of the caution.

 

April 2003 and afterwards

 

The Land Registration Act 2002 (LRA) and Land Registration Rules 2003 (LRR) introduced significant changes to

land registration procedures. Cautions were no longer to be used. Instead when a creditor obtained a charging

order against a debtor: If the property was solely owned by the debtor, or all owners of the property were debtors, for example husband and wife owning the property jointly and being joint debtors, then an ‘agreed

notice’ was to be filed at the Land Registry by the creditor. Effectively this was almost as good as

having a mortgage. The debtor could not realistically sell the property without repaying the debt to the creditor. However, if the property was jointly owned by the debtor with other none debtors, for example husband and wife owning the property and only one of them being the actual debtor, the creditor was not entitled to enter an agreed notice. Instead the creditor could only file a ‘restriction’ at the Land Registry in the

following terms: “No disposition of the registered estate is to be registered without a certificate signed by the

applicant for registration or his conveyancer that written notice of the disposition was given to [creditor...]

being the person with the benefit of an interim/final charging order on the beneficial interest of [name of... debtor].”This restriction was, and remains, practically useless.

 

 

The effect of the restriction The debtor and his joint owner’s freedom to sell the property is not affected by

such a restriction. They could sell the property as if there was no charging order against the debtor. All that was

required was that the new buyers or their solicitor write to the creditor informing them that they now owned

the property and then confirm to the Land Registry that they had given that

notice. Then the buyers could register the property with no further complications. The creditor, who is sitting back,

waiting to get paid, instead just receives a letter confirming that a sale has already

taken place, typically a week or two after the sale so there is little they can do to

get the debt paid. In theory the creditor could apply for

a freezing order against the debtor to try and obtain the cash from the sale

proceeds. However, most creditors will never make such an application: The cost of applying for such a

freezing order would run into thousands of pounds. The debtor might have spent the cash from the sale of the property before the freezing order was obtained so there is little, if anything, for the freezing order to bite on.

 

Therefore that is the difference between a charging Order versus a restriction post 2003

[Ganymede]

Can someone be treated "more equally" than someone else? I can't really see what Link are doing that is unreasonable; they're accepting basically nothing in payment, they're waiting for the sale of the property and not issuing a claim, they haven't petitioned for bankruptcy, they just want some security pending sale and if the OP does indeed intend to pay Link from the proceeds of sale what is the harm of having a restriction in place to ensure that occurs?

 

 

I'd duck for cover if I were you...

[AndyOrch]

I'd duck for cover if I were you...

 

[asokn]

I'd duck for cover if I were you...

 

Agreed, but I have no particular axe to grind and I try to give specific help tailored to each case rather than starting from the presumption that everything a creditor does is bad!

[asokn]

I understand why Link are doing it but will there be any complications with selling whilst there are charging orders on the property? Will the purchasers of the property be notified of these Charging Orders and would that put them off buying?

 

I cannot imagine that it would complicate your sale any more than a mortgage would. The buyers will be aware of the restriction and it will almost certainly be a condition of the sale that the charge is redeemed, i.e. that Link are paid (which is why, as an aside, the apparent difference between a charge and a restriction is purely academic), but that is true of a mortgage as well.

[AndyOrch]

An effective restriction

 

A restriction worded as follows would provide a creditor with sufficient protection: “No disposition of the registered estate is to be completed by registration without a certificate signed by [name the creditor with the benefit of the charging order and their address], being the person with the benefit of an interim/final charging order on the beneficial interest of[name of judgment debtor], or his solicitor that he was given written notice of the disposition at least 14 days prior to the disposition or without an order of the court which granted the interim/final charging order.”

 

If the wording suggested above were to be allowed, a creditor would have the right to be notified before a sale. The fact that such notice has to be given would mean that a debtor will know he

cannot sell the property before the creditor finds out about the potential sale – and of course takes steps to prevent the sale until the debt is paid.So the debtor will pay the creditor

before selling the property.Perhaps at some stage, the LRA will be amended to allow such an effectively worded restriction. In the meantime, a creditor which obtains a charging order

against a debtor who owns property jointly could try to persuade the Land Registry to allow the more effectively worded restriction set out above.

 

If that attempt fails then the creditor could apply to the court for an order that the Land Registry must allow that wording.

 

Application to the Land Registry

 

The Land Registry may approve an application to allow a restriction in non-standard wording if it appears:That the terms of the proposed restriction are reasonable, andt hat applying the proposed restriction would be straightforward, and not place an unreasonable burden on him.In my view, the Land Registry should allow a restriction which actually gives some protection to creditors. However,

I have yet to see such an application and suspect that the Land Registry will not readily allow such non-standard

wording.

 

Applications to the court

 

If the Land Registry refuses to allow a non-standard word restriction, then a creditor may wish to consider making an application to the court. Inevitably there are risks with this:Creditors should bear in mind that if the application is unsuccessful then they will have wasted the costs of making the application.

 

So far as I can ascertain, an application along the lines suggested has not yet been made. A court may adopt a restrictive view and state that a creditor may have nothing other than the standard-worded restriction set out in the LRA.

 

Conclusion

 

The current protection afforded to creditors who have a charging order on property owned jointly by a debtor with others is useless. Unless the creditor can persuade the Land Registry or the courts to allow a more effectively worded restriction, the creditor must look at other ways of recovering the debt.

 

 

Andy

[Gaston Grimsdyke]

The fact is that, while restrictions may be technically useless as a means of security, in practice the vast majority of conveyancers will not complete a sale without the underlying charge being paid off. So in reality they are a very effective means of securing a debt hence the reason creditors routinely obtain charging orders on jointly owned properties. Restrictions (and before that cautions) have for decades been effective methods of debt recovery even though they can quite easily be by passed. And if the conveyancing world ever did change its attitude towards them then sure as eggs is eggs legislation will be passed to plug that hole.

[asokn]

Perhaps we should just copy and past the above few posts into every thread as, sooner or later, these exact same points crop up

[DuffNCustard]

A debt that was once unsecured or unrestricted is not such a valuable debt to sell on. You say that they just want some security - well maybe they do and maybe they don't. For my part the bottom line on any financial services activity is profit and the pursuit of it will be ruthless. I don't buy for one minute the inferred proposal that Link are being altruistic here. They haven't petitioned for bankruptcy as they would have to lay down money to do so and there are of course the minor considerations of the CCA 1974 and subsequent amendments that they are required to abide by - unless they can manoeuvre their way around them.

 

Your advice leaves me pondering - I cannot fathom whether it is breathtakingly naive or cynical in the extreme. Having once been seriously in debt I certainly found no 'win win' or reasonableness in the debtor-creditor situation. It was purely business and took hard bargaining and tough negotiating and I still have the battle scars. For the record I paid all my debts in full and never sought to evade them.

[asokn]

 

Your advice leaves me pondering - I cannot fathom whether it is breathtakingly naive or cynical in the extreme.

 

Are you referring to my advice? If so, what on Earth are you talking about?!

 

I'm sorry you feel a personal animosity towards creditors which is preventing you from being objective or polite and I'm sure you're not alone but let's not play with other people's lives here.

[eggboxy1]

The effect of the charge would be that Link would be paid from the proceeds of sale of the property before any money came to you (although prepare for another forum member to say that is not the case).

 

The "effect" is reference to what has been happening but what legally doesn't have to happen (although some members of this forum are desperate to rail against this fact )

 

See posts #582 & #585 here http://forums.moneysavingexpert.com/showthread.php?t=1839539&page=30 to see that "effect" has began to change.

[Gaston Grimsdyke]

So that single case where a solicitor didn't redeem a charge secured by a restriction is the beginning of a change in conveyancing practice? Clued up conveyancers have been doing this for years, your case is nothing special. The point is there are only a handful of conveyancers who practice that way, the vast majority will refuse (rightly or wrongly) to complete a sale without paying off the debt underlying a restriction. Maybe to achieve your mission you would be better off gathering a database of appropriate conveyancers you can refer people to who want to sell their houses without paying off restrictions.

[eggboxy1]

So that single case where a solicitor didn't redeem a charge secured by a restriction is the beginning of a change in conveyancing practice? Clued up conveyancers have been doing this for years, your case is nothing special. .

Obviously not if your assertion regarding clued up conveyancers is correct, but it is an example to show other people interested that it can be done and legitimately (but thank you for confirming it can and is being done)

 

The point is there are only a handful of conveyancers who practice that way, the vast majority will refuse (rightly or wrongly) to complete a sale without paying off the debt underlying a restriction

I agree that is how things work at present but, as we have heard from people dealing with conveyancers when selling a house with a Restriction, it's largely through ignorance of the facts and a beligerance to maintain the status quo.

 

 

Maybe to achieve your mission you would be better off gathering a database of appropriate conveyancers you can refer people to

Maybe you would do the honours here as you seem to be aware of those conveyancers who are doing it (no I thought not!)

 

who want to sell their houses without paying off restrictions.

 

Restrictions (in the Form K as these are) don't need to be paid off which is the whole point; they only hold power of notification. Any Charging Order attached to this type of Restriction was only made on an Interest which may or may not exist.

 

As the CO only secured the Judgement, and not the debt itself, there is no legal obligation to anyone selling a house to pay off this type debt with the proceeds of their house sale.

 

The Law is for everyone, remember.

Edited April 29, 2012 by eggboxy1

[Gaston Grimsdyke]

What is your point? It's common ground that restrictions is effectively inadequate security for a creditor; I am merely pointing out that in the real world in fact they do represent good security because of conveyancing practice. You appear to be on a crusade to change that, well if so you are going the wrong way about it. You've obviously decided that as I have presented a detached view of the subject I must have an agenda. I have absolutely no interest in whether someone wants to sell their house without discharging charges secured by a restriction and, yes, I do know conveyancers who would do so quite willingly - for all you know I might be one myself.

[eggboxy1]

I would have thought anyone reading my posts knew what my point was? But just so you're not confused;it's simply to further inform people that are in the position of having had a Restriction placed on their property, for unsecured debt, that they have a legal option not to pay the attached CO when they sell up.

 

It is difficult, though, not to come to the conclusion that you have agenda given your dismissive posts on this subject but, if you don't have one and you are as "detached" and as disinterested as you say, then why would you have a problem with someone promoting this information?

Edited April 29, 2012 by eggboxy1