Charging Order? The myth

Nuttymut

eggbox wrote: »

Well in the first instance you simply write and explain that, due to your circumstances, your payments will be reduced to what it is you want to offer.

If the creditor doesn't want to accept this he then has to decide what he wants to do next. Given they have a CO on your property (and therefore feel they have security) its unlikely they will do anything.

Update. Letter sent to solicitor given precise instructions and also asking how he proposes to mitigate any damage done to my interests.

I think an alternative conveyancer, solictor may be needed if he refuses to take my instructions. Is it possible for someone to recommend a solicitor who's tickity boo with all this sort of stuff please.

Or is that not allowed on the forum?

And for the avoidance of doubt if my solicitor does refuse to accept my instructions I don't propose to let him walk away completely. That, however, is a separate issue to trying to progress the sale and keep my interests uppermost.

Nuttymut

eggbox

There have been board members who have been helped by Solicitors but there has been a reluctance to advertise who they are?

If your Solicitor is unwilling to help and you have to go elsewhere, be sure to have the information regarding Restrictions to hand and explain upfront what you want.

Sadly, there is a huge reluctance by Solicitors to take on board the facts of the matter regarding CO's on jointly owned property so be prepared to have to contact a few to get what you want.

Nuttymut

Hi eggbox

I've exchanged correspondence with my solicitor. It wasn't pretty.

I've called back to seek some additional guidance if I can please.

My solicitor is saying this ;

It is possible that the restrictions could be overreached on a sale of the property, however this is by no means a certainty, as they are protected on the title of the property. Overreaching is a tool used to protect the holder of a first charge (such as a mortgagee) when repossessing a property, or by a trustee in an estate to protect the interests of beneficiaries from unregistered and unknown encumbrances.

The issue here is that with the restrictions being registered the purchaser will not be able to claim that they did not have notice of the same and may therefore be bound by such restrictions. In the event the property was sold, and the Land Registry would subsequently not remove such restrictions, the purchaser would be left with the burden of those restrictions. The potential removal of these restrictions also comes after the point of sale, which would place the purchasers mortgage charge below these charges. It is the case that a mortgagor will not lend to a purchaser without knowing they will be the first registered charge.

Any purchaser of the property will want, on completion, an undertaking that the restrictions be removed. We could only provide such an undertaking if;

1. There was sufficient money from the sale to pay them off in full (which there is not); or

2. The people with the benefit of the restrictions agree to remove them for less than their full value.

In order to go forward with your proposal of potentially overreaching, we would need to communicate to the purchasers solicitors that this was your intention, and find if they were willing to proceed in this manner, and without the undertakings they had requested. (which I very much doubt they will). For the reasons set out above, I would not advise this course, as I fear it would lead to the purchasers pulling out of the transaction.

The final point to make is that the purchasers solicitors have requested an undertaking, which Is a guarantee from this firm, that we will remove the restrictions on completion. As I have previously set out the only way we can do this is for you to provide us with instructions that you will have the restrictions removed. The process of overreaching is after completion, and we cannot give the required undertakings with this course of action.

It is simply not possible that we proceed to completion without this issue being resolved, as the purchasers solicitors will require the undertakings requested, or a response in that regard prior to exchange or completion.

Moving forward I see there to be three real of options available to you and shall require your instructions on how you wish to proceed;


Inform the purchasers solicitors you intend to the overreach the charges and will not provide the undertakings required. We will then await confirmation whether the purchaser is willing to proceed on this basis, which as I have set out is unlikely.

Engage in correspondence with the creditors to try and negotiate settlement figures to allow you to provide undertakings requested by the purchaser.

Obtain independent legal advice individually, as a result of the potential conflict in your interests.

I propose to ask the Land Registry the following questions ;

1. Under what circumstances, given that the property is sold to an independent, unconnected third party, would the restrictions that we have on our property not be removed even if they are overreached?

2. What is the normal procedure and timescale for restrictions which have overreached to be removed after completion?

3. What, if any criteria are required to be fulfilled to achieve this, bearing in mind that out buyers are
stating that they will not proceed with the sale if these restrictions are not removed prior to completion?

4. What, in the knowledge of the legal team, is the normal procedure for sales with such restrictions as they must see this regularly?

Do you feel this has legs?

Best
Nuttymut

eggbox

Hi Nuttymutt

Firstly forget asking the LR the questions above as they won't answer them as its deemed giving legal advice which they can't do.

Your Solicitor has given his explanation which I, personally, think is a bit of a confused response. He is wrong regarding overreaching as it protects the buyers interests, too. The LR response on this matter was as follows;

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"

So your Solicitor is not correct in what he saying and needs to understand that if you are to progress with him. But he has suggested talking to the buyers and that is what you need to do next.

If LAND REGISTRY REP is looking in on the thread if he has any comments on what Nuttymut's Solicitor has stated it would be useful to know?

Also, if you search for BRIGHTONIAN on this thread read his story as he persuaded his Solicitor to listen and sold his house accordingly.

Land_Registry

eggbox - as you have already explained we are not able to provide legal advice so any response to either Nuttymut's questions or comment on their solicitor's response would not be something we could entertain.

As you already appreciate the law is very complex around charging orders and whilst we can assist with registration issues we cannot advise on how the law might interpret such matters and/or how individual parties or their solicitors could or should act in a given set of circumstances.

Having said that of course I can reiterate what has been said before with regards how we would approach an application to register a Transfer on sale where a restriction is registered against the title. The same response would be provided to Nuttymut's solicitor if they enquired of us as well.

Some restrictions may be cancelled automatically because they are superfluous (end on a certain date or on a certain event such as someone's death) but if a restriction “catches” a disposition or dealing, the restriction must be complied with even if the restriction will be cancelled after the disposition has been registered [the solicitor's response alludes to the importance attached to the order of events when dealing with changes to a registered title].

There are a fairly wide variety of restrictions which can be cancelled automatically in a given set of circumstances including a restriction that protects an interest under a trust of land and the interests under the trust has been overreached because there has been a transfer for money by two or more proprietors to a third party. Restrictions that protect an interest under a trust of land include Form K.

The response you have quoted from us is therefore quite correct.

We will invariably refer to 'should' and 'usually' for example simply because until an application for registration is submitted we do not have the full details required to consider whether automatic cancellation of the form K restriction can take place or not. And by full details I mean those that relate to the what is registered rather than details around the debt, the court process etc

In my experience in most cases where there is a transfer on sale by two or more owners and a form K restriction is registered then it will be overreached. We would not look to expand on that in a hypothetical way.

Nuttymut poses the question as to in what circumstances would the restriction not be removed. Proving a negative is often more complex than proving a positive and in my view would be of little benefit here as you have a specific set of circumstances and not a hypothetical one.

Finally, and perhaps emphasising the point yet further, our guidance to those with the benefit of a charging order and who seek to register a form K restriction explains that

Entry of a restriction does not protect the priority of the interest to which it relates for the purpose of section 29, Land Registration Act 2002. A charging order affecting only the beneficial interests under a trust is liable to be overreached along with those interests by the operation of sections 2 and 27, Law of Property Act 1925. Accordingly, a Form K restriction will usually be cancelled automatically, without application, when a transfer which appears to overreach the beneficial interests is registered.

eggbox

As ever, Land Registry Rep, many thanks for your input on this!

Nuttymut, LRR has given you everything you need to explain to your Solicitor why his explanation regarding overreaching and reservations regarding the sale are, shall we say, misplaced.

Especially the final paragraph which explains exactly why the Restriction would be removed upon a sale as being overreached.

skintbex

Quick question. Or two.

I am selling my property to my ex and his wife. It's currently in joint names, and he's basically remortgaging and buying me out.

Q1 - There are two restrictions on the property relating to CCJs, however one of them I was never told about, and the debt has been repaid in full. What legal obligations does the creditor have to remove the restriction in place (the one I was never actually told about )?

Q2 - I appointed a solicitor who told me I didn't need one as it was essentially a transfer not a sale, and that all I need to do is complete an RX4 and an ID1 form, but despite this, the buyers solicitor is saying it's a policy of the mortgage that both parties need legal representation...I don't see why I would be forking out a fortune for a solicitor if I don't actually need one, what would they actually do? It's down to the buyers' solicitor to inform the Land Registry of the sale, if I have read correctly.

Land_Registry

Not too sure if some fo the details have been muddled here as you refer to 'selling and 'buyers solicitor' whilst your solicitor said it was 'essentially a transfer not on sale' - which is it?

Whilst it might not be a normal sale if you are being bought out in part settlement and they are acquiring a mortgage to raise the funds to do so then it is not 'essentially a transfer not on sale'.

So, Q1 - I am not aware of any legal obligation on the creditor's part to have the restriction removed so you can either apply to cancel it (form RX3) or ask them to withdraw it (form RX4). Has your solicitor got the wrong form here or are you going to ask the creditor to withdraw their restriction?

Q2 - Lenders will invariably insist on parties being legally represented as it creates a 'safer' conveyancing environment and aids the passage of the monies from the lender to the buyers and then to you. Although the buyers' solicitor will lodge the application with us that is something quite separate

eggbox

Skintbex

Who are the restrictions against, you or your other half?

skintbex

Restrictions are against me, as the debts were in my name.

Sorry LRR, the solicitor said RX4, I'm not familiar with the forms or the legal terms but this is delaying the sale which is frustrating for me and the ex!

Basically he is getting a new mortgage with his wife to buy me out as NRAM were cagey about a change of parties and aren't allowing remortgages.

As the solicitor put it, I would need to sign a deed, prove my identity and their solicitor would do the transfer of funds.

This is the only thing holding up the sale now.