Charging Order? The myth

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Helpappreciated

Assuming you have the same type of Section K Restriction placed on your LR details as I have then, below, is word for word what the LR Solicitor wrote and explained to me by way of explanation of what this type of Restriction means;

"This means that the Land Registry will not register a transfer or charge (for example) unless the applicant for registration confirms that they have given notice of the transaction to (my ex's creditor). What the interested parties do at this point is not, of course, a matter for the Land Registry."

She confirms that all is required under a Section K Restriction, to enable the LR details to be transfered, is the confimation (they call it a Certificate) confirming that your Solicitor has notified the creditor with the Restriction the property has been sold.

I had asked the Solicitor what my legal standing was regarding selling the house with a Restriction placed on it. Whilst the Solicitor explained she couldn't give legal advice, she understood I was asking if I could sell my house without paying the creditor under the terms of the Restriction. So if the terms of the Restriction did mean I had , legally, no choice but to pay the Creditor when I sold my house then she would have had to confirm that to me. She didn't.

You must remember there are several types of Restrictions and some do require the written agreement of the Restriction holder to enable LR details to be changed. A Section K Restriction, however, only requires confirmation you have notified the Restriction holder.

Remember to point out to your Solicitor that he/she should be acting in YOUR best interests. Therefore, they have a duty to explain to you where it states on the terms of your Restriction that you have to satisfy a creditor to allow a house sale to proceed? When they can't ask them to explain why, as your agent, they are recommending you shell out thousands of pounds that you don't have to?

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From the Land Registry's "The Act in Action Speakers Notes - Third Party Interests"

Slide 29 (Summary:Notices)

To briefly summarise, third party interests can now only be protected in the register by means of notice or a restriction

Notices confer priority on the interest, provided that interest is valid.

Slide 30 (Summary: Restrictions)

Restrictions, in contrast, do not confer any priority on the interest to be protected. But the terms of the Restriction must be complied with before any disposition can be registered.

This is further evidence that there is no requirement to pay any restriction holder when you sell your property if it is not in the terms of the Restriction (which in a Form K type there isn't)

helpappreciated

From The Land Registry Site Fact Sheet How to deal with a restriction relating to a charging order

Helping you to manage restrictions
John and William Smith own a hardware store in Gloucester.
One of their customers, Mr Brown, has failed to pay for goods supplied to him.
To protect their interest, John and William have obtained a charging order against Mr Brown’s beneficial interest in 55 High Street, Stroud which he owns jointly with his wife.
They have applied on form RX1 for the following form K *
restriction to be entered on Mr and Mrs Brown’s register:
“RESTRICTION: No disposition of the registered estate other than a disposition by the proprietor of any registered charge registered before the entry of this restriction 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 John Smith and William Smith at Unit 24 London Road, Gloucester GL4 5VN, being the person with
the benefit of an interim charging order on the beneficial interest of George Brown made by Gloucester County Court on 15 November 2004 (Court reference GL/346).”
This restriction means that no disposition of 55 High Street can be registered other than a disposition by the proprietor of any charge registered before the restriction, without notice first being served on John and
William Smith which will give them the opportunity to recover the debt owed by Mr Brown.
Once the debt has been paid Mr and Mrs Brown can apply in form RX3 for the restriction to be cancelled. Notice of the application will be sent by Land Registry to John and William Smith. Alternatively John and
William Smith (as restrictioners) can apply on form RX4 to withdraw the restriction.
Practice Guide 19 – Notices, restrictions and the protection of third party interests in the register contains further information on charging orders.

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The above assumes Mr and Mrs Brown want to stay in the house with the Restriction

If they have sold up and moved on (having notified the creditor to allow disposition) the Restriction automatically becomes "superfluous" and will be removed by the LR.

Sparklyfairy

Helpappreciated, how are you getting on with your sols? I wholeheartedly agree with Eggbox - I think you should fire them even if that means you lose your buyer..

Can I just remind you all of this thread, written by solicitors about Restrictions from April 2003 onwards..

Part of it reads:
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

Egg, this seems to confirm with what the LR have said...according to this, it's up to the new buyer's solicitor to write to the creditor & the LR..

terryw

For those of you who have asked for details of firms of solicitors who are knowledgeable about this, why not try the firm who are mentioned in the link?

Sadak Miah is a partner at solicitors
Blake Lapthorn Linnell; James Britton
is a barrister practicing from 2KBW
E-mail: Sadak.Miah@bllaw.co.uk
E-mail: james.r.britton@btinternet.com

Sparklyfairy

Terry when I originally heard about this link I thought of that - but I after reading it, these solicitors are wanting to change the current law regarding restrictions...so I'd give calling them a miss personally...

thechippy

Sparklyfairy wrote: »

Terry when I originally heard about this link I thought of that - but I after reading it, these solicitors are wanting to change the current law regarding restrictions...so I'd give calling them a miss personally...

Why would they want to do that Sparlky, what good would it do them??

Sparklyfairy

Chips, I could be wrong, but to me it just reads as advising creditors of this loophole in the law for restrictions & they even go on to advise how to go about changing how the LR words the restriction documents..

"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."

Also "In our view, the Land Registry should
allow a restriction which actually gives
some protection to creditors."

They also mention freezing orders after a sale..All of this would make me question where their loyalties lie if someone with a restriction hired this firm for their conveyancing needs...

helpappreciated

Land Registry Practice Guide 19 – Notices, restrictions and the protection of third party interests in the register


Sorry I cannot post links. its at LR site [FONT=&quot]documents/pg19[/FONT]
Hard work reading this- shame our solicitor isn't more help. If we still get no joy tomorrow we shall have to start looking for another.:D