Charging Order? The myth

eggbox

Dakota

Firstly, Court staff are a complete lottery to deal with and HATE letting anyone off Court Fees with an exemption (and so are extremely diligent in turfing applications out that don't cross every "t" and dot every "i"!)

I had a major bust up with one a few months ago over them not accepting a person I was helping's fee exemption application (he was newly self employed and they would only look at his income on his business account and disregarded his outgoings??). When we eventually succeeded they then "forgot" to put the application in front of a Judge for 6 weeks?

Anyhoo....., what you need to apply for is a set aside of the original judgement (N244) on the grounds you have been prejudiced by not having your counter claim heard when it should have been (only you know if this is correct?)

But I would advice a Solicitor drafting your application to ensure you haven't got the worry of missing something out?

DAKOTA45

eggbox wrote: »

Dakota

Firstly, Court staff are a complete lottery to deal with and HATE letting anyone off Court Fees with an exemption (and so are extremely diligent in turfing applications out that don't cross every "t" and dot every "i"!)

I had a major bust up with one a few months ago over them not accepting a person I was helping's fee exemption application (he was newly self employed and they would only look at his income on his business account and disregarded his outgoings??). When we eventually succeeded they then "forgot" to put the application in front of a Judge for 6 weeks?

Anyhoo....., what you need to apply for is a set aside of the original judgement (N244) on the grounds you have been prejudiced by not having your counter claim heard when it should have been (only you know if this is correct?)

But I would advice a Solicitor drafting your application to ensure you haven't got the worry of missing something out?

Yes… this is it!… I had definitely sent the documents and a special exemption form… I don't know what happened, but I seem to remember going to the court and asking them to retrieve my file to see if my counterclaim and the other relevant documents were filed… and they said they were unable to find the file… it tuned out a while after that the file had been sent to a London Court… possibly because my counterclaim was above the limit to be heard at CC level… but I took another form to the court so that it would be read by the judge prior to the hearing… he just ignored it, telling me that I could still pusue it but allowing the FCO to go ahead rather than hearing my counterclaim… :mad:
They certainly don't assist LIPs at all… even though they are supposed to help…
Yes, I was thinking it would need to be set aside… but what a mess… and every single application just adds to the costs, where it could have been done and dusted...

Enterprise_1701C

eggbox wrote: »

You need to check you Land Registry deeds which you can now do online for a small fee.

You will be able to see what is registered there and who it is against.

Apologies for taking so long to get back to you, a lot going on. We have actually just had the deeds through from our mortgage company along with a lot of various bumf and it turns out the charge is against my OH. Any idea what we should do now? I reiterate that we have paid this off, it would simply be rather hard to prove it! Thank you.

Land_Registry_representative wrote: »

colouredfrog - that is probably something eggbox can advise on

All we can do is advise on the differences and approach from a registration perspective which usually comes at the end of the conveyancing process.

I included yourself in case you can give me any advice on getting a charge removed that has been paid, we are talking approximately 20 years ago. Thank you.

Land_Registry

Enterprise 1701C - do you mean the same charge as refererd to in this thread? https://forums.moneysavingexpert.com/discussion/5258069

If so then the issue seems to be that the lender is claiming you still owe them something - if that is the case then the onus is either on you to either prove to them that you have cleared the debt or on them to accept it has been paid following their own investigations so that they can then discharge the (registered legal?) charge.

We would not judge the circumstances ourselves so if you feel that you have proven the point but they simply will not accept it then it would be the legal process you would turn to although from your thread it sounds as if the paperwork has been lost so proving this may be difficult without some serious investigation on how you paid and when for example in your own bank records?

Enterprise_1701C

?

Land_Registry_representative wrote: »

Enterprise 1701C - do you mean the same charge as refererd to in this thread? https://forums.moneysavingexpert.com/discussion/5258069

If so then the issue seems to be that the lender is claiming you still owe them something - if that is the case then the onus is either on you to either prove to them that you have cleared the debt or on them to accept it has been paid following their own investigations so that they can then discharge the (registered legal?) charge.

We would not judge the circumstances ourselves so if you feel that you have proven the point but they simply will not accept it then it would be the legal process you would turn to although from your thread it sounds as if the paperwork has been lost so proving this may be difficult without some serious investigation on how you paid and when for example in your own bank records?

Thank you. Fairly sure they have lost the paperwork too, a few years ago we rang up separately and got two totally different figures!

We are about to make an information request to the bank we were with at the time, but this is more than 20 years ago!

Land_Registry

Sadly if the charge is still registered and they are pursuing you for the debt then the burden of proof that you have paid is likely to be very much on you - that is based solely on experience of dealing with enquiries and the background/outcomes involved.

The lender has the legal proof that the debt exists as the charge is still registered and we are reliant on either their removing it or a court ordering that it is rmeoved.

eggbox

LRR

How would a Charging Orders be registered twenty years ago (before the 2003 changes) Were there differences to the Form K Restriction introduced for Joint Owners/Sole Debtor?

DAKOTA45

eggbox wrote: »

LRR

How would a Charging Orders be registered twenty years ago (before the 2003 changes) Were there differences to the Form K Restriction introduced for Joint Owners/Sole Debtor?

I think they used cautions in those days… 14 days notice of disposition… then the new rules apparently 'did away' with cautions… (only they didn't in my case, as a modified form K restriction may include them…)

Or that's as I understand it…

Enterprise_1701C

Land_Registry_representative wrote: »

Sadly if the charge is still registered and they are pursuing you for the debt then the burden of proof that you have paid is likely to be very much on you - that is based solely on experience of dealing with enquiries and the background/outcomes involved.

The lender has the legal proof that the debt exists as the charge is still registered and we are reliant on either their removing it or a court ordering that it is rmeoved.

Apologies for keeping on, but does it actually make a difference if they are not pursuing us? It is purely us that are trying to deal with this.

DAKOTA45

Eggbox & Enterprise 1701C

I wonder if this is helpful?

Property Law Journal - Protecting charging orders

Some interests which would once have been protected by a caution against dealings are now only capable of protection by the registration of a restriction. Allyson Colby, an associate at Wragge & Co LLP, compares and contrasts the two regimes.

Cautions against dealings were abolished when the Land Registration Act 2002 came into force on 13 October last year.

Applicants often used cautions against dealings to protect interests - including charging orders - that were also capable of protection by the registration of a notice, simply because the Land Registry did not require applicants to produce the land or charge certificate, or the registered proprietor’s consent to the registration of the caution.

But the Law Commission recommended the abolition of cautions against dealings because they were not an effective method of protecting an interest in land. This only became fully apparent as a result of the decision in Clark v Chief Land Registrar [1993] Ch 294 (which was subsequently affirmed in [1994] Ch 370 CA). The case made legal headlines because it confirmed that a caution did not provide the cautioner - in this case, the holder of a charging order - with the cast iron protection many had believed that they had obtained by registering a caution. A caution simply secures a right to be notified of any dealing with land affected by a caution - and a purchaser will take subject only to the risk that the cautioner might object to its application for registration, not subject to the right itself.

However, the Land Registration Act 2002 contains transitional rules, which preserve cautions against dealings that were already on the register. The rules provide that the procedures that applied to the warning off and withdrawal of cautions will continue to apply. So:

registered proprietors can still apply to warn off cautions against dealings – a useful remedy because applicants to register cautions were only required to outline, and did not have to prove, their claim;
the Land Registry will serve notice on a cautioner warning of the impending cancellation of its caution if the proprietor applies for the cancellation of the caution or on any dealing with the interest affected by the caution;
cautioners will continue to have the opportunity to show why the caution should remain on the register or why the dealing should not be registered, as the case may be, failing which the caution will be cancelled; and
if the cautioner can satisfy the Land Registry that the caution should remain on the register, the parties will have to refer the matter to the adjudicator.
The efficacy of cautions against dealings – and the ability to warn them off - was put to the test again very recently in Kastner v Jason [2004] EWHC 592 (Ch). The proprietor of land persuaded the claimant to invest in his company. The claimant discovered that he had been defrauded and decided to take action to recover his loss. Both parties were orthodox Jews and were required, under Jewish law, to refer their disputes to a Beth Din, which they did.

The claimant subsequently applied to the Beth Din for, and was granted, a freezing order which prevented the proprietor from selling or disposing of the land – his only asset – without the written consent of the Beth Din. The claimant also asked for, and obtained, permission to register a caution against dealings against the title to the land. The caution was duly registered, but the registered proprietor sold the property anyway and emigrated to the United States taking the proceeds of sale with him.

It seems that the solicitor acting for the buyers simply failed to spot the caution. The Land Registry refused to register the buyers’ application for registration. It notified them that it would cancel their application unless they took the requisite action to vacate the caution, and cancelled the application for registration a month later.

The claimant then sought to enforce his claim for the damages awarded to him by the Beth Din – which had been quantified at £237,000 – via a charging order against the property. The buyers applied for the vacation of the caution and for a declaration that they were entitled to be registered as the proprietors of the land.

The High Court ruled (without enthusiasm, because the decision left the claimant without any legal remedy at all) that the claimant did not have a proprietary interest in the land. The freezing order, which prevented the sale of the property, operated in personam and not in rem. The defendant did not have any obligation to settle his debt from the proceeds of sale of the property, and the freezing order did not create any lien, or charge over, or other interest in, the land.

This left the judge with no alternative but to order the vacation of the caution because, under the Land Registration Act 1925, it was only possible to register cautions against dealings to protect interests in land (Elias v Mitchell [1972] Ch 652), so the claimant’s caution should never actually have been registered at all.

The cautioner in the Clark case fell victim to an oversight at the Land Registry; the member of staff who dealt with the application for registration of the transaction which took precedence over the interest "protected" by the caution simply completed that application without advising the cautioner first.

The cautioner in Kastner v Jason was the victim of an oversight because the solicitors acting for the buyers failed to note the existence of the caution. But the judge echoed the Law Commission’s comments in their consultative document "Land Registration for the Twenty First Century":

"As long as a caution remains on the register, it prevents the registration of any disposition of the land. Provided that the registration system functions as it should, there is normally no possibility of completing a disposition by registration without the cautioner’s rights in some way being addressed."

(Law Commission No 254)

The judge commented that, if the solicitors for the buyers had noted the existence of the caution and had reported it to their clients, there was no doubt that they would have refused to complete the transaction unless and until the cautioner was properly protected. This is because, in practice, no buyer or lender will part with the purchase price for a property without first securing the cancellation of any caution against dealings – so a caution against dealings will usually secure a payment to a cautioner with a valid claim.

Third party interests – the new regime

Applicants can now protect third party interests in one of two ways – by registering a notice or restriction (see boxes).

Notices are for use in cases where an interest will not be overreached on a disposition; the registration of a notice will not inhibit any dealing with the property, but will ensure that the right that it protects will bind any person who acquires the land.

By contrast, the registration of a restriction will prevent the registration of any dealings with a property or will secure the right to be notified on any application to register a dealing. The restriction will not override the interest of any purchaser who applies to be, and is, registered with title to the property; it operates to prevent the priority of a third party interest from being postponed.

In some cases, it may be possible to register both a notice and a restriction. For example, potential purchasers under options and rights of pre-emption may be able to apply to register a notice to protect their interest in a property and, if the contract so permits, a restriction to prevent the registration of any disposition to a third party without the buyer’s consent.

However, applicants should be aware that some of the interests that would have been protected by a caution against dealings under the old regime are now only capable of protection by the registration of a restriction.

The article on "Charging Orders" which appeared in Property Law Journal on 26 April 2004 explains the Land Registry’s approach to protecting charging orders. It explained that applicants must have a charging order against the legal estate to place a notice on the register.

The article confirms that an applicant who has a charging order against the beneficial interest of one of joint proprietors, or separate charging orders against the beneficial interests of each registered proprietor, must apply for the registration of a restriction. This is because charging orders like this do not attach to the legal estate – they simply affect the proprietor’s interest under a trust of land, and interests under trusts of land can only be protected by the registration of a restriction.

So chargees must apply to register a restriction in the terms set out in standard form K. Under the terms of this restriction, an applicant for registration need only certify that it has given the chargee written notice of the disposition in his or her favour. Nothing further is required, and the standard form restriction does not impose any requirement that the chargee must consent to the registration of the disposition.

So the effect of registering a restriction in such cases is in many ways similar to the effect of registering a caution against dealings. The chargee will be entitled to notification that the registered proprietors have made a disposition, which will probably trigger further action to recover the debt due.

There is, however, one crucial difference between the operation of a caution against dealings and a restriction in standard form K. In the case of a caution against dealings, it is up to the Land Registry to serve a warning notice notifying the cautioner that its caution will cease to have effect in fourteen days time and, in reality, no buyer will part with the purchase price without ensuring that the chargee is prepared to vacate the caution.

But the Land Registry need not take any action whatsoever in the case of a restriction in standard form K. It can simply rely on a statement that the applicant or its conveyancer has served the requisite notice, and there does not appear to be any minimum period of notice that is required to comply with the terms of the restriction. It is, therefore, possible that the Land Registry might, in certain circumstances, actually complete the registration before the chargee has received notice of the dealing or had time to react to it.

Conclusion

Applicants could apply to register a "non-standard restriction" in such cases, but the Land Registry will refuse to register a non standard restriction if a standard restriction is appropriate.

Another alternative might be to ask all the registered proprietors to agree not to dispose of the registered estate without the chargee’s consent. The chargee could then apply to register a restriction in respect of that agreement, in a suitable form. But not all proprietors will be prepared to co-operate in this way and the case of Kastner v Jason provides a graphic illustration of the lengths to which some debtors will go to avoid payment.

In her article in Property Law Journal on 26 April 2004, Linda Chamberlain does suggest a partial solution to the problem. Creditors should press the courts to change their current practice and grant single charging orders over the whole of the legal estate in cases involving applications for charging orders against all the registered proprietors of an estate, so that they can register notices (and not restrictions).

Creditors will take the view that this is not the complete answer to their problem, but the Land Registry does keep its practice and procedures under constant review. It is to be hoped that the Registry will be quick to react to any cases that reveal potential flaws in its new procedures.

Form K
(Charging order affecting beneficial interest – certificate required)

No disposition of the [registered estate or registered charge dated [date]] 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 [name of person with the benefit of the charging order] at [address for service], being the person with the benefit of [an interim] [a final] charging order on the beneficial interest of (name of judgment debtor) made by the (name of court) on (date) (Court reference ... ).

Notices

The entry of a notice on the register does not necessarily mean that the interest claimed is valid but, if it is valid, the entry of the notice will confer priority on that interest. Applicants can choose to register either an agreed notice or a unilateral notice.

The Land Registry will only register an agreed notice if the proprietor consents to the registration or if the applicant can satisfy the Land Registry that he has a valid interest in the land.

By contrast, applicants can register unilateral notices without the proprietor’s consent. Applicants will not be required to satisfy the Land Registry that their claims are valid and will not need to provide any evidence in support of their claim.

Restrictions

Restrictions prohibit the Land Registry from making an entry in respect of a disposition or of a disposition of a specified kind. A restriction will make it apparent that the powers of the relevant proprietor are limited, or that a prior condition must be met before a disposition can be registered. The prohibition may be for a specified period, or may last indefinitely. It may be absolute, or may be conditional on something happening (for example on the consent of a third party being obtained).

The Land Registration Rules 2003 prescribe a number of standard restrictions for use in common situations. Applicants can still apply to register "non-standard restrictions", but the Land Registry will refuse to register a non standard restriction if a standard restriction is appropriate, or if the terms of the non standard restriction are unreasonable or are such that the Land Registry would find it difficult to ascertain whether an applicant for registration had complied with the terms of the restriction.

Notices v cautions against dealings

A unilateral notice provides greater protection than a caution against dealings because
cautions are liable to be cancelled whenever a dealing by the proprietor or a registrable disposition is entered in the register. The benefit of a notice is transferable and, if the interest protected by the unilateral notice is valid, then the notice will protect its priority.

So cautioners may well wish to register unilateral notices in place of their existing cautions against registration, in cases where it is possible to do so, even though the Land Registry will not notify the beneficiary of a notice of any subsequent dealings with the land; the notice will simply remain on the register and its priority will be preserved.

Allyson Colby is an associate in the real estate professional support team at Wragge & Co LLP. She can be contacted on allyson_colby@wragge.com or by telephone on (0121) 233 1000.

This article was first published in the September issue of The Property Law Journal, published by Legalease Ltd.

The information in this article was correct at the time of writing.

This article contains information of general interest about current legal issues, but does not give legal advice.

1 Note that section 93 of the Land Registration Act 2002 contains provisions that enable anyone who is applying for or who has the benefit of a freezing order, or who has given an undertaking in place of a freezing order, to apply for a restriction in standard forms AA, BB, CC or DD.