Charging Order? The myth

eggbox

Kay_Bee_2 said:

Dear eggbox,

Thank you for your detailed reply which I appreciate although I don’t fully understand all of it, in particular the section where you talk about selling the house, I am probably blinkered in my thoughts right now

“This means that, whilst the Charging Order is still attached to the debtors beneficial interest, the debtor now has the beneficial interest in the form of cash and has the advantage of disposing of it how he wishes (which is not usually in the direction of settling the debt.) So, whilst it may not be the perfect answer for you, as long as you are still a joint owner you can consider this option as an alternative to settling your husbands debts when remortgaging?”

Hi Kay_Bee_2
The bit you've highlighted in bold was referring to the fact that, if you are still a joint owner with your ex, you have the opportunity to sell the property without settling the debts on completion of the sale. For overreaching to occur the sale has to be for be for value and sold by joint owners. It was suggested as an alternative to remorgaging, whereby, you are going to have to remove the restrictions prior to the new loan happenening (unless your existing lender is willing to remortgage for the reasons I explained.)

I understand you would prefer to stay in the property but, as you have found out from the info you related in your first post; the restrictions won't be removed whislt you remain in the property unless they are settled. This is because the Law has given the creditor the right to attach his debt amount owed to the debtors financial interest in the property and they have priority (by date) over other dealings (such as a remortgage) on the property. 

However, a Form K restriction (and you do need to check it is a standard Form K registered on the deeds) is very easy to comply with when a debtor sells a property. Coupled with the fact the buyer of the properties interests then overrides the debtors restriction on the deeds; the restriction will then be, automatically,  removed. And if you solicitor ever questions this information then please refer him to the Land Registry's Paractice Guide 76 Section 4 Para 3 where it states;
"We will automatically cancel the Form K restriction once it has been complied with on registering a transfer of the registered estate for valuable consideration. We will assume that if the debt secured by the charging order has not been paid, your client’s interest will have come to an end with the postponement of the charged beneficial interest under section 29 of the Land Registration Act 2002."

So, like a creditor has the opportunity to turn an "unsecured" debt into a "secured" one; so the debtor has the opportunity to turn a "secured" debt back into an "unsecured" one. The debts will still exist they will just return to the responsibilty of your ex.

Kay_Bee_2

Hi eggbox,
Do you think it is possible to buy my ex-partners beneficial interest or have a greater share (80/20) awarding to me in a matrimonial  financial settlement, although not sure it works like, then I could re-mortgage with current leaders and leave the restrictions on the register until I am ready to sale in the future.  I appreciate this an divorce/family law matter, however you do seem to have a good general knowledge. 

eggbox

Since the Charging Orders were granted you and your ex will have become Tenants in Common (married couiples are usually Joint Tenants but this is severed by the Charging Order) which, in the absence of any Deed or Declaration of Trust stating different percentages; the Law will assume you both own 50% of the beneficial interest (equity in the property.) There is nothing to stop your ex from transferring his share of the equity to you as long as you understand the restriction will remain on the property deeds. It would be in your interests to do this as, unless your ex has left you his share in a will; should he die then his share wouldn't automatically pass to you as it would if you were joint tenants. 

Then, depending on the amount of equity in the property against the size of debt owed; this could smooth the passage to your existing lender koffering a remortgage nowing you own all the equity minus the restriction debt amount. 

Kay_Bee_2

Hi eggbox, thank you this maybe the way I need to go, I will get advice and hopefully my ex-partner will agree to this  His debts amount to more than his 50% of the equity as it stands.  Is there anything I should worry about, his name will still be on the deeds. If this were to happen would the creditors need to be informed, I suppose the creditors could still push for a sale.

Kay_Bee_2

one other thing would I need my ex-partners permission to sale at a later date. I presume I would and what would happen if he passed away?

eggbox

It depends what his status is at the time of selling. Its the legal owners of a property who have the right to sell the property so if he signed his equity over to you, but was still on the deeds, then he would have to agree to the sale. 

eggbox

Kay_Bee_2 said:

Hi eggbox, thank you this maybe the way I need to go, I will get advice and hopefully my ex-partner will agree to this  His debts amount to more than his 50% of the equity as it stands.  Is there anything I should worry about, his name will still be on the deeds. If this were to happen would the creditors need to be informed, I suppose the creditors could still push for a sale.

Hi Kay_Bee_2

Sorry I missed this message - You probably understand you aren't responsible for your husbands debts and the creditor is only entitled to recover their debt from the 50% share your ex currently owns. However, it wouod still be worth getting him to sign over his interest to you as, should you ever decide to sell your property as this thread explains; you would be in receipt of all the proceeds upon sale. 

As any creditor who has ever obtained a CCJ will tell you, its one thing to have a Court decide you are entitled to the money but its a whole other ball game trying to get hold of it after the Judgement. 

Pinkflora1974

Hi,
I am new to forum and have been reading these posts regarding charging restrictions and would 

like someone to just confirm I am correct in what I’m thinking before I approach solicitors.
we are in the process of selling our house and there is a charging restriction (form k) on land registry against my husband from Northern Rock/eversheds. I know this has been sold on to link financial and have told our solicitors this. They have advised us that the sale can’t proceed any further until they get permission from Eversheds that they can remove the restriction. They have written to them 4 times with no response. 

My understanding from reading this thread that is that as long as they have advised Eversheds and confirmed this to buyers solicitors and land registry, the restriction will be removed once the sale has completed and new owners are registered? I don’t understand why my solicitors aren’t accepting this!
thanks

eggbox

Hi Pinkflora1974
If the restriction is required to be removed prior to the sale then your solicitors are correct and, whoever, has the benefit of the Charging Order would be required to remove it, which they will do, after their debt is settled. However.....................this thread is explaining that prior removal of a, Form K, restriction is not necessary when selling a property.
,
The reasons for this is that a Form K restriction (and we're assuming its a Form K restriction with the standard wording here) doesn't provide very strong security for the creditors debt. This is because,
1. To comnply with the restriction the buyers side only have to notify the creditor, and then confirm to the Land Registry that they have done so, that the property is being sold.
2. The above allows the Land Registry to transfer the property to new owners
3. Once the transfer has been completed, the restriction will be overreached (assuming the property has been sold for value by joints owners to a third party) and will, therefore, be removed.
4. This is confirmed by the Land Registry in their Practice Guide 76 Section 4. Pargarph 3 which states;
"We will automatically cancel the Form K restriction once it has been complied with on registering a transfer of the registered estate for valuable consideration. We will assume that if the debt secured by the charging order has not been paid, your client’s interest will have come to an end with the postponement of the charged beneficial interest under section 29 of the Land Registration Act 2002."

Therefore, your Solicitor can be advised that you don't wish to settle the debt upon sale (which they are trying to do) and you will deal with the matter after the sale has been completed. The Law has given your creditor the right to a certain amount of your husbands beneficial interest, it hasn't stated when that has to be paid (if your solicitor says it has to be upon sale of the property ask them to show you where it states that in Law?)

Its assumed, by solicitors, that the creditor will try to claim its debt upon notification of being told the property is for sale. However, that your example demonstrates that four attempts have failed to produce a response from the creditor; highlights this is, very often, not the case. This thread is, also, littered with posters who have been thwarted in their attempt to sell property by creditors who, either, don't respond, deny the debt is theirs or can't give a settlement figure.

So, its being pointed out that there is an alternative way to sell the property which is perfectly legal as nothing illegal is being carried out by this process. Having said all of this you should prepare yourself for the following,

1. If the buyer is using a mortgage to purchase the property the lender will, almost certainly, insist on the restricion being removed prior to sale as they are as intransigent as most solicitors in understanding Form K restrictions.
2. The Buyers solicitor will also request the removal of the restriction prior to sale, however, sellers have reported that once their own soliciotr has been shown the facts, then they've managed to persuade the buyers solicitor to proceed

So good luck and I will finally add that NR/Eversheds can sell the debt on, however, Link aren't legally entitled to the debt if a Court hasn't re-assigned the original CCJ, to them, and that was obtained for the original debt. You Husband should also have been informed of any re-assignent by the Court.  

Pinkflora1974

Amazing Thankyou for your reply. It is a standard form k restriction saying written notice should be provided (it has) and a signed certificate given. Our solicitor knows it doesn’t need to be settled - she just for some reason is adamant they must agree to removal which they clearly aren’t even going to bother to reply and confirm! I will go back to her with this and see how I go. Thanks again for advice.