Charging Order? The myth

ohitsonlyme

Thank you for the input  Eggbox
Both Creditors will continue to have restrictions on at the second property that my ex wife still has a 50/50 ownership so

I am hopeful that we can negotiate in order she can buy somewhere to live.

 I have a very good consumer credit solicitor on board as well as my good conveyancing solicitor. I hope to be able to negotiate and shall report back to the thread so that others can gain information from our experiences

Onlymeagain

Somersetian

Hello

I would appreciate any help regarding unblocking the sale of my joint owned property. There are two interim charging orders (the standard Form K wording is used on the Land Registry) from 2009 for historic credit card debts in my sole name. We've found a buyer for the house and there is plenty of equity in the property to settle the debts and move on. The problem is that my solicitor has contacted both banks multiple times and received either no response or a response that says that they have no record of the debt and/or me.

Without the creditor being able to effectively give permission to sell we are unable to proceed to exchange of contracts and also therefore unable to complete the sale to repay the debts. My solicitor is adamant that exchange can't happen until the banks make contact and provide the certificate to the Land Registry to remove the restrictions.

Is there anything that I can do to unblock this catch-22 deadlock of not being able to make contact with the banks to repay the debt owed through selling the property?

I've had some excellent advice elsewhere to raise a formal complaint on the lack of and inadequate responses and to raise an ICO complaint too, but time is very much of the essence with an understandably frustrated potential buyer.

Any advice would be very much appreciated!

eggbox

Somersetian

Your solicitor is incorrect in his assumption the creditor has to give permission for the sale to proceed. This is because a standard worded Form K restriction wording does not include permission from the creditor being required for a transfer to proceed. Instead it only requires the following;

1. That the creditor be notified the property is being sold 
2. That the buyer (or his agent) verifies to the Land Registry that the above notification has been given.

That is it. If your solicitor persists he is correct then tell him to contact the Land Registry and they will point out the error of his ways. Complying with a Form K restrictions terms as above, allows the Land Registry to transfer ownership of the property.

You will, however, normally get grief from the buyers solicitor who will say they require the restrictions removing PRIOR to sale. The only way to remove the restriction prior to sale is for the creditor to remove restrictions as they are satisfied their debts are being repaid from the impending property sale. As you have informed, however; the creditors aren't even claiming the debts so this isn't possible?

Therefore, it needs to be explained to the buyers solicitor that the restrictions will be removed upon the transfer occurring as they will become overreached. The debts will still exist, but they will pass to the beneficial interest (equity) you take out of the property which is then of no concern to, either, of the solicitors involved or the new buyer. What you do with the money is then up to you.

Land Registry Rep will, hopefully, confirm the above so you can explain to your solicitor but a call to the Land Registry will do the same. Further, your solicitor can consult the Land Registry Practice guides 19 and 76 which confirm all of the above is correct.

Land_Registry

Eggbox has reaffirmed matters correctly. Our PG 76 makes it quite clear that a charging order protected by a form K restriction will be overreached in given circumstances
Ringing us is unnecessary as it’s the conveyancers who need to consider the positions taken and PG 76 offers the guidance we can offer. Calling doesn’t change or add to that position and is therefore unnecessary 

eggbox

Land Registry Rep

Thank for confirming and I do understand what you say about it not being necessary to ring the Land Registry or, more accurately, "shouldn't" be necessary as conveyancers should know this information already.

Sadly, as has been proven on this thread dozens of times, the vast majority of solicitors who posters employ not only don't know the correct information, they have shown a huge unwillingness to accept contrary information from the great unwashed clients who are paying them for their "professional" services.

So, its been a requirement in the past to have the contrary information they've received, confirmed by a  "professional" at the Land Registry. The fact the information is contained in the Practice Guides, also doesn't seem to cut much ice with many solicitors mainly, I feel, because they are worried about having their backs covered and need the verbal re-assurance to change their opinion. 

Somersetian

Thank you @eggbox and @Land_Registry - the quick responses and clarity are really appreciated. I've asked my solicitor to look again in light of the above and hopefully that will be enough to keep the sale on track. I am hoping she will at least consider the clarification with an open mind and proceed. Changing solicitor now would be a pain but not so painful as losing a good buyer and having to start all over again.

Somersetian

@eggbox and @Land_Registry Thank you again for the advice yesterday. I've discussed this more with my solicitor (a new locum standing in for the original) and whilst she agrees that the theory is possible the practicalities are still a barrier. It would be really appreciated if a couple of further points could be clarified:

1) She agrees that the buyer's solicitor can certify the notice given the Land Registry but the restrictions will still remain in place even after the transfer. So ownership of the property would transfer but also too the restrictions to the buyer and no properly advised buyer would agree to this.

2) Whilst agreeing that the Land Registry could in theory override the involvement by the banks, this would in practice not be possible due to it not being straightforward and because of the "huge backlogs" at the Land Registry.

In the background I am still trying to find someone in HBOS and Smile / Co-op banks who will respond but with no response since starting trying in August I'm not hopeful.

eggbox

Somersetian

1) She agrees that the buyer's solicitor can certify the notice given the Land Registry but the restrictions will still remain in place even after the transfer. So ownership of the property would transfer but also too the restrictions to the buyer and no properly advised buyer would agree to this.

No, this is not correct. The restrictions remain in place after compliance of the restriction has taken place, however, the restrictions are automatically cancelled by the Land Registry upon the transfer taking place as they become overreached. Your locum can verify this for herself by viewing Practice Guide 76 Section 4. Para 3 where the Land Registry explain;

"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."

2) Whilst agreeing that the Land Registry could in theory override the involvement by the banks, this would in practice not be possible due to it not being straightforward and because of the "huge backlogs" at the Land Registry.

With respect to your solicitor, and a someone who has sold a property during covid in the manner explained above, you can explain she is talking arrant nonsense and shows a complete lack of understanding on the subject. Its nothing to do with the banks other than they might be one of the creditors with a restriction. Any "backlogs", if relevant, would also affect any dealing on the property which they don't. 

If Land Registry Rep is looking in he may wish to clarify the Land Registry's stance on "backlogs", however, this is why I explained a call to the LR is often required to break down the stubborn resistance conveyancers have when these facts are presented to them by the public.

 

Land_Registry

eggbox said:

Somersetian

1) She agrees that the buyer's solicitor can certify the notice given the Land Registry but the restrictions will still remain in place even after the transfer. So ownership of the property would transfer but also too the restrictions to the buyer and no properly advised buyer would agree to this.

No, this is not correct. The restrictions remain in place after compliance of the restriction has taken place, however, the restrictions are automatically cancelled by the Land Registry upon the transfer taking place as they become overreached. Your locum can verify this for herself by viewing Practice Guide 76 Section 4. Para 3 where the Land Registry explain;

"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."

2) Whilst agreeing that the Land Registry could in theory override the involvement by the banks, this would in practice not be possible due to it not being straightforward and because of the "huge backlogs" at the Land Registry.

With respect to your solicitor, and a someone who has sold a property during covid in the manner explained above, you can explain she is talking arrant nonsense and shows a complete lack of understanding on the subject. Its nothing to do with the banks other than they might be one of the creditors with a restriction. Any "backlogs", if relevant, would also affect any dealing on the property which they don't. 

If Land Registry Rep is looking in he may wish to clarify the Land Registry's stance on "backlogs", however, this is why I explained a call to the LR is often required to break down the stubborn resistance conveyancers have when these facts are presented to them by the public.

 

1) agreed
2) it is very straightforward hence the very simple registration guidance provided
How complicated the wider issue of the debt/charging order maybe why some solicitor’s see th8ngs differently 

Whilst we do have a backlog the reality is we always do as we are a registration authority so in a sale/purchase we register post-completion. 

Why does that matter? Well the guidance explains how a form K is overreached provided the restriction is complied with. And as the restriction states the requirement is to give notice of the disposition to the creditor and that’s pre-completion, not post. 

On the phone call front the point I was trying to make is that a caller will simply be directed to the guidance as signposted. 

We’re not here to convince anyone or change minds although I can appreciate eggbox’s point. We provide guidance as explained and whether that’s followed or not is always down to the reader

Somersetian

I think - slowly - there is some movement on the advice given by @eggbox being accepted and I'm now more hopeful that exchange will happen soon. Thank you for the help and advice.

One new development is that one of the banks has finally responded (coincidentally after making a formal complaint) and stated they have sold the debt on at some point. Does this have any bearing on the interim charging order? If they don't own the debt then do they still have an entitlement to an interim order? Should the LR record have been updated to the new debt owner?