Charging Order? The myth

eggbox

Jackie 235

1. Start by understanding your Solicitor is an idiot (as its their job to know the rules in this area) but understand you need to guide them through the process as they don't like a member of the public telling them their job!
2. There is no legal requirement for you to pay the debt owed at the point of sale that would prevent the sale proceeding.
2.The Restriction placed only notifies the debt is owed and places certain conditions on allowing a change of ownership to be registered when sold.
3. To proceed, however, you will have to convince the BUYERS solicitor that all that is required for the sale to proceed is for them to notify you creditor the sale is proceeding and also give proof of that notification to the Land Registry. This is the ONLY requirement for the sale to proceed and to enable the new owners details to be registered with the Land Registry.
4. Once this has happened, the restriction will be removed upon purchase as it will become "overreached". This is explained in the Land Registry's Practice Guide Practice Guide 76 section 4 paragraph 3
5. The debt does not disappear and you will still, legally, owe the money from the sale proceeds. However, it will then be up to you how you go about paying the debt and for the creditor to find another way to get you to do so.
6. You can tell both Solicitors the Land Registry will confirm the above if they ask, verbatim, the following question;
" After the Restriction has been complied with and the new owners details have been registered, will the Restriction then become overreached and, therefore, be removed?"

See what response this produces and then come back here if you are still having problems? (Oh, and if your solicitor keeps banging on about breach of contract ask him which contract they are referring to?)

Jackie235

Hi eggbox, and LR thanks for the reply’s, I have sent my solicitor the link to the guidance notes, I will post their reply shortly. I am very concerned about the whole thing

eggbox

Well the worst that will happen is you won't be able to move as the Solicitors will contrive to **** up the sale for you by refusing to follow what the rules say?

If that happens the creditor will get their Charging order made final on your property and then....................nothing else will happen. A creditor with a CO can, technically, apply for an order for sale to sell your house to recover the debt. On family and main residential homes, however, they are virtually impossible to obtain and with children impossible to obtain as they have rights under TOLATA.

The key to this is that they are high interest consumer credit loans and whilst the Judiciary have virtually no powers to stop a CO being granted; they have 100% discretion over whether to grant an order for sale. Court statistics show they just won't grant these for debts such as consumer credit loans where the creditor will have already received much of his original loan back through the high interest charged.

As many will attest on here, its not nice receiving the CO but it won't affect our life in the short term. As time goes by, the value of your house will increase but the CO debt remains the same. So the burden of the debt decreases year by year in real terms.

The creditor has also gone as far as he can in collecting any repayment in the short term so I advise debtors not to repay anything more than a token £1 a month.

Jackie235

The solicitor has ****ed it, she replied to my email stating the rules with this:

I have spoken with Shoosmiths the Solicitors representing Creation Consumer Finance Limited they have advised that there will be shortly in place over your property an Interim then a Final Charging order.

They will unfortunately not put in place a payment plan and will seek the full repayment of all 4 accounts. Once they have full settlement they will then remove the Interim Charging Order.

If you can please consider the position and provide me with your instructions.


I have just come off the phone to my her and she has asked them for a redemption figure FML

eggbox

Jackie235

You need to explain to your Solicitor that as your property is jointly owned, but the debt is only against one on the joint owners; then an equitable charge on the land (property) can no longer be made.

The Land Registry 2003 rules now only allow a restriction to be placed on the deeds whether the CO is interim or final.

As such, and as an employee of the Land Registry has explained; for a sale to proceed it only requires compliance with the terms of the restriction to allow a new owner registration to proceed.

You have a Form K restriction which only places the condition of certifying to the LR that notification to the creditor, by the buyer, that the property is being sold has been made. NOTHING ELSE IS REQUIRED.

As LR Practice Guide 76 confirms (and also the LR over the telephone if asked the right question above) once the sale has been completed for "valuable consideration" (not just transferred) then the restriction becomes "overreached" and will automatically have to be removed.

What happens to a third party debt is of no consideration, either, to your solicitor who you are paying to represent you; or your buyer whose purchase takes priority over the restriction.

Jackie235

eggbox wrote: »

Jackie235

You need to explain to your Solicitor that as your property is jointly owned, but the debt is only against one on the joint owners; then an equitable charge on the land (property) can no longer be made.

The Land Registry 2003 rules now only allow a restriction to be placed on the deeds whether the CO is interim or final.

As such, and as an employee of the Land Registry has explained; for a sale to proceed it only requires compliance with the terms of the restriction to allow a new owner registration to proceed.

You have a Form K restriction which only places the condition of certifying to the LR that notification to the creditor, by the buyer, that the property is being sold has been made. NOTHING ELSE IS REQUIRED.

As LR Practice Guide 76 confirms (and also the LR over the telephone if asked the right question above) once the sale has been completed for "valuable consideration" (not just transferred) then the restriction becomes "overreached" and will automatically have to be removed.

What happens to a third party debt is of no consideration, either, to your solicitor who you are paying to represent you; or your buyer whose purchase takes priority over the restriction.

My solicitor has just said on the phone that as we are joint tennants and shoosmiths have an interim order then they would need to pay the amount on the redemption statement out of the sale proceeds. I’m at a loss what to do next

eggbox

You need to explain to your solicitor that you DO NOT wish to settle the charge upon sale as there is no legal obligation to do so (if they disagree get them to show you where it states, legally, you have to pay the balance upon sale) and that you wish all the proceeds to pass to you upon sale.

Explain you understand the debt is still owed but as their is no legal obligation to pay the proceeds upon sale, or any legal obstacle preventing the new purchaser taking possession of the property, you will have no alternative but to report them to the SRA (solicitors regulation authority) if they don't follow your instructions.

This will go down like a lead balloon but you have nothing to lose now as they aren't playing ball? I have to say they sound like a right bunch of muppets as its usually the buyers solicitor giving all this gumph?

Jackie235

Hi eggbox, thanks for all your help so far, I don’t know what I would have done if it wasn’t for this thread and your massive help, another solicitor from the firm has just called me to say that it’s doable and they have spoken to LR who confirmed the law on this and she agreed that it was a bit pointless them going for a charging order in the first place as it technically means nothing. They have asked if they can hold back the amount of the debt until it all goes through incase it goes tits up lol

eggbox

Jackie235

That's good news but I will caution the hard part is yet to come as the buyers solicitor is usually the most difficult to convince?

A CO isn't pointless it just means the creditor isn't likely to get paid for donkeys years? Many of the people I've dealt with have had them for over 15 years?

I have a theory that many DCA's go after a CO as it will appear as an "accounts receivable" on their balance sheet.This can make the company look a lot more profitable on paper? But who knows?

The other caution I have to give is that if you appear as one of the owners in your new property then its highly likely Shoosmiths will try to get a CO on that property? So if you are able to sell up be careful how you go about distributing the share of ownership in the next property.

Jackie235

Hi Eggbox, I think they have the other side convinced due to them suggesting holding back the money to pay the debt off should things go pear shaped, I don’t plan on being named on the new property I’m just going to live there. Once I’m sorted I can begin paying the debt back at an affordable rate as shoosmiths wanted the full wack back in one go( they are very unhelpful and don’t seem to know what they’re doing as one person says one thing and another says something else) which I didn’t really want to do as technically the money from the house isn’t all mine
Thanks for the help and guidance so far I will keep you updated