Northern Rock charging order - solicititor said dont pay when i sold house - now what?

[birdy99999]

HI,

 

Can anyone help??!!

 

I had an unsecured loan with Northern Rock that I couldnt pay so they took enforcement action and eventually were granted a charging order on my property.

 

I naturally assumed that when I sold the house they would get their money before any balance would be paid to me (after the mortgage as well)

 

However when I did sell my Solicitor told me that i had the 'option' to repay the charging order and it was not compulsary??!!

 

I declined to pay them, have charging orders lost their bite - is this now the case that you have the option? I did query it with the Sols but they said that they no longer have any bite and are pretty much useless.

 

I cant find anything on the net to substantiate this - does anyone have the answer and where would it be written down - Thanks

[MadScouser]

Only reason I can think of would be debt is soley against you, whereas the house has joint ownership, so the charging order is a restriction.

[Ganymede]

Only reason I can think of would be debt is soley against you, whereas the house has joint ownership, so the charging order is a restriction.

 

 

 

Yup, this will be why.

 

The Charging Order was probably only registered as a Restriction.

 

The OP should know that the debt will now revert to being unsecured and that Claimant can continue to chase for payment and even apply for another Charging Order on any new property.

[eggboxy1]

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?

[birdy99999]

Hi,

 

I understand your points that may be valid but I was originally advised that they could take half of the equity (being my share) - there was enough of my equity to pay them.

 

The only correspondence I received post the sale was from my Sols - they had received a strong letter from Northern Rock Sols asking them to explain themselves on 'why' they had not repaid the order and sent them any money.......not heard anything since and its been nearly 2 years

 

Thoughts?

[eggboxy1]

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?

[birdy99999]

I gogled the issue about the charging order and asked the question on a forum like this and the overwhelming response was that I would have to pay the order but they could not touch my partners share it could only be paid via my share of the equity

 

But what you say must be absolutely correct as my Sols did say that all they needed to do was advise Northern Rock's Sols - Thanks for the info

 

The next part of this then surrounds CO's and how they work - you say that a restriction is registered at Land Registery, is that all a claimant can do with a CO or are there different types?

 

As you quite rightly say, you would have expected the buyers Sols or Mortgage lender requesting that the restriction be moved - any suggestions why they never asked, presumably you would have thought they would have insisted.

 

And after Northern Rock Sols have been advised that there is a sell 'what options' are open to them to enforce the debt when it appears they are reliant on the buyers Sol not telling them that its not compulsary to repay and/or purchasers sols making the request to remove (repay)

 

is this 'how' CO's work because I thought the person with the CO could enforce it by means of forced sale (but would imagine difficult to get as not many judges would be keen to grant i would imagine) and they would get their money

 

Thanks for your help with this

[eggboxy1]

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.

[Ganymede]

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.

[birdy99999]

Brilliant, that's crystal clear and definitely makes sense - my solicitor never offered the information to me I asked if it was compulssry to pay them just before I was signing, more tongue in cheek and then she advised me. It was on the same day for completion and had an extra £50k that I didn't expect to get..... and to be fair northern rock screwed me cos it stemmed from me being guarantor for a relative borrowing, I agreed a repayment figure with them when they defaulted but at the death they re-neged and decided to add on collosal default and interest charges that added upto £19k......more the wiser now

[eggboxy1]

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

[birdy99999]

Hi Egg,

 

Thanks for the info - very knowledgeable on the subject, got a scenario for you:

 

A Housing Association took over the old council stock - circa 6000 houses and flats and became the new landlord. As part of the transfer the tenants kept their 'right to buy' rights that they were entitled to (in some cases upto 60% discount).

 

Some of the tenants in a block of flats have exercised this right and bought - these were bought on a Leasehold basis as the Housing Association own the Lease. Under the terms of the Lease the council tenants that bought still have a responsibility to contribute to repairs to the building and communal areas. The Housing Association have just had significant repairs done to the roof and each flat has an individual bill of £9k - the Housing Association Tenants proportion of the bill (their 9k) will be covered by the Housing Association but those that bought have received a demand for the money, giving them 12 months to pay.

 

The Housing Association have implied that if they do not receive payment in 12 months (as they are due the money under the terms of the lease) then they will apply for a Charging Order - presumably they are able to do this as it states in the lease and would become an equitable charge as the debt will be the buyers (whether sole or joint) of the flat and again as they would have got 60% reduction off market value there would be enough equity?

 

Cheers

[eggboxy1]

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?

[Ganymede]

Here

 

Section 3.1 Paragraph 2

 

 

Cheers.

[nickypicky1978]

hi ya eggboxy1 can you post the link again as its not working and would be really grateful of some advice as having problems with old charging orders and restrictions at the moment.

[nickypicky1978]

hello just wondering if you can send me the link that says restrictions dont have to be paid when u sell your house etc as i cant get it to work now on the link you posted

[eggboxy1]

Hi nickypicky1978

 

If it's a Standard Form K Restriction the only requirement to sell your house to a buyer is for the buyer to notify the creditor a sale is proceeding. What happens after that is not a matter for the Land Registry.

 

These are the LR guides that explain how a Restrictions removal works;

 

Practice Guide 76 Section 4 Paragraph 3

 

 

Practice Guide 19 Section 3.2.1 Final Paragraph

[nickypicky1978]

Hello,

 

The house is already sold as I handed the keys back to my mortgage company.

 

 

They took their money then sent the surplus funds on to the next charge .

 

 

. Now there are just restrictions left and

 

 

my solicitor is saying they don't have to be paid as the house was sold under the power of sale act by the mortgage company

which has now wiped off EVERTHING off the register,

 

 

but the charge who is holding the funds is refusing to send the remaining back to me as claims the money should now be forwarded to the restrictions.

 

 

My solicitor has informed them they no longer have a charge or restriction as they are now just reverted back to unsecured debts,

but they aren't budging and the arguing continues

 

 

this has been going on for 4 months now

[eggboxy1]

Your Solicitor is correct. Under a Power of Sale all 2nd plus Charges and Restrictions on the register are removed to allow the First Charge holder to obtain a sale.

 

 

As such, the 2nd Charge plus Restriction creditors lose their legal claim on the money from a "Charging Order" perspective

even though they still have the CCJ in place that allowed them to obtain a CO.

 

It's a tricky one as you do owe money under the CCJ, so I would be inclined to put pressure on the Mortgage company

to explain why they passed on the proceeds to a third party, rather than yourself given the circumstances of the sale

, and that you will have to consider legal action if the money isn't returned.