Charging Order? The myth

JasmineStocks

Thank you for your replies. I spoke to my mum's solicitor today and she said that even though the restriction debts were in my late step father's name, they are debts against the house and she has to pay them otherwise the sale cannot go ahead. I quoted all the advice learnt about restrictions and charging orders on this thread and she said that I shouldn't believe what I read on the Internet. She said that the restrictions were charging orders under another name. I spoke to the buyer's solicitor who said that they will not go ahead with the sale until they have a written undertaking from the companies who added the restrictions that they will lift them. We are stuck. I am not allowed to pay these debts myself, the money cannot come from a third party (they have to come from my mum's bank account). So I can't even use my credit card to pay them. We now have negative equity as there is not enough money to pay them all off. There is enough money to pay off the charging orders but not the restrictions as well. So to summarise: my step father died unexpectedly and we found out that there were 3 charging orders on the house and two restrictions. Two of the charging orders had my mum's name on them also. I found her a flat to rent near me because she wanted to get out of the house and as it is a 3 bedroomed house it was too large for her and we put it up for sale hoping to clear all the debts. Also, my mum's solicitor told me that no other solicitor would recommend anyone buying a house that had restrictions on it so my mum is basically stuck with it unless she comes up with ALL the money to pay off the debts.

eggbox

Your Solicitor, unfortunately, is mistaken. A Restriction is not a Charging Order it is a notification of a Charging Order that is against you step Dads "Beneficial Interest" or his share of any equity in the property. They are not, however, attached to the property itself.
As for your Solicitor telling you that only your Mom can pay off the debt that is completely absurd. No creditor would give a monkeys who pays off the debt as long as its settled!

But non of this helps you if your BUYERS solicitor is ignorant of the facts too? The good news, however, is that you have options, given your Moms financial situation.

The first option is to contact the REGISTERED CO holders and explain what you are trying to do. Explain that if THEY cant persuade the Restriction holders to allow the sale your Mom will be handing back the keys to the mortgage lender and be walking away from the property. The Charge Holders will understand that if your house is handed back it will be sold at a lot lower value and they might not get repaid.

If they aren't prepared to do anything then my advice is to walk away anyway straight away. Your Mom has no equity to hang around for and, by renting, she has no leverage creditors can use threats against her in future. The mortgage will be settled from a future sale along with the sale costs. The only losers will be the CO holders. As your Mom will already have CCJ's she also has no credit record to worry about as its already knackered.

Above all DO NOT pay these debts yourself and certainly drop your ill informed solicitor.

JasmineStocks

Hi Eggbox, thank you so much for your advice. The solicitor says that my mum has to pay her the money for the debts and she will pay the restriction owners and she won't accept any third party money. I was thinking the same as you too. Just walk away and tell the Charging Order companies to fight for it! I just don't understand how the restriction owners can go after my mum for the money afterwards if the debt wasn't in her name. The solicitor said that she is liable for them and they HAVE to be paid because the debts are against the house. That can't be right. I'd feel better knowing that the CO companies have their money and so can't go after my mum (because two of them do have her name on them) but how can it be right for the restriction companies to want the money off her? Thanks.

eggbox

The Restrictions are nothing to do with your Mom (that are in your step Dads name). If your Solicitor has told you she is responsible for these debts they really need reporting to the SRA as they appear incompetent? A Restriction can only be registered on the Land Registry deeds because it is only against ONE of the debtors. If you Mom was responsible too it would be a CO registered against the property.

There is zero possibility they can pursue your Mom for these debts either now or after a sale. Any money due for Restrictions in his name can also ONLY come from his share of the sale proceeds.

I understand you wanting to settle the matter properly, but you have a very lazy Solicitor not helping you. Only you can decide what to do, but if there is enough money to pay off your Moms debts from a sale; she can walk away knowing SHE hasn't let anyone down as she has tried to do the right thing. So don't screw your lives up further by trying to have more of a conscience as, believe me, solicitors and debt collectors wouldn't do the same.

JasmineStocks

Hi Eggbox, I feel so relieved to know that there IS a way out. If the restriction companies won't provide a guarantee to the buyer's solicitors that they will take off the restrictions then I will report them to the Charging Order companies and tell them that we are trying to pay everyone off but the restriction companies won't allow us to. How can my mum's solicitor reply with so much conviction that my mum is liable for these debts? It's scary! Thank you.

eggbox

The creditors with the Restriction have no power to block a sale. The Restriction only states NOTIFICATION has to be given that a sale is happening. It is only the unwillingness of the Solicitors that prevents the sale proceeding. There is no legal obligation to settle the CO notified by a Restriction upon a house sale - FACT!

You do need to question your solicitor on why she is advising your Mom to settle you Dads debts as it is totally wrong.

JasmineStocks

Thanks Eggbox. The solicitor told me that no other solicitor would agree to their client buying a house with restrictions on it. The buyer's solicitor won't go ahead with the sale until they have a written guarantee that the restriction companies will take off the restrictions and they are not going to agree to that until we promise to pay them. So we will be going round in circles. I shall be looking for further legal advice from someone who specialises in charging orders and restrictions.

eggbox

That, largely, is the case regarding Solicitors as they don't understand (or don't want to understand) that Restrictions are not meant to bar a sale. The problem in your Mom's case is there isn't enough to pay all the creditors. That, I'm afraid, is a problem for the creditors not your Mom.


Let's just say if your Mom stopped paying the mortgage then your Mortgage lender would (eventually) reposses the house and the charge holders would then only have any scraps left after a repossesion sale. They would have no choice in this.


So your Mom really has nothing to worry about given she has no equity in the property. She can't wreck her credit rating any further so she really can hand back the keys and walk away whenever she likes.

JasmineStocks

Thanks again Eggbox. I am going to contact the restriction companies and show them the proof that there is negative equity in the house and there is no way that they can get all their money back from the sale. I shall ask them to remove the restrictions so that we can sell and pay off the charging orders. If they refuse then I will contact the charging order companies and tell them that they can't have their money because of the restriction companies. I'd rather do that then walk away because if the house is sold at auction my mum may still end up owing money to the charging order companies and I don't want her to have to worry anymore. Of course, that would be an option if my plan doesn't work.

Also, I wanted to ask a question about what happens to a joint tenant's "beneficial interest" when they die. These restrictions are on the beneficial interest of my step father. I thought that when a person dies the surviving person becomes the sole tenant. I've read somewhere that if there are restrictions on the house though, then the sole tenant automatically gets changed to a tenant in common. The fact that my step father has died must surely mean that the restrictions should be taken off as my late step father no longer has a beneficial interest in the house and it is not part of his estate (as it would be if he was a tenant in common). Or if there was enough equity they could only be paid out of my step father's half of the equity and they couldn't touch my mum's half? I don't really know how that works. Any thoughts? Thanks.

JasmineStocks

I just found this on a website regarding Deceased Insolvents.

7. What happens to property that was owned under a joint tenancy by the deceased debtor prior to his/her death?

The deceased debtor's interest in property owned under a joint tenancy will pass automatically to the other joint owner or owners by right of survivorship, and will never become part of the insolvency estate.

The trustee may seek to recover the value of the deceased debtor's interest in the property that has been lost to the estate by making an application to the court under section 421A. On the application of the trustee the court may make an order requiring the surviving partner to pay to the trustee an amount not exceeding the value lost to the estate. Section 421A came into force on 02 April 2001 and applies where an insolvency administration order has been made in respect of the deceased debtor and the petition for that order was presented within the period of five years beginning on the day on which he/she died.