Charging Order? The myth

eggbox

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If the restrictions are standard form K and they have been complied with, then a creditor cannot prevent a sale from proceeding. What usually prevents a sale from proceeding, however, are the conveyancers acting for the sale insisting the restrictions are removed prior to sale. Has neither conveyancer mentioned the restrictions?

You also say one of the creditors "live close by", which sounds like an individual who is owed money by the seller? This thread is primarily concerned with advising people on the weakness of Form K Restrictions who have had a CO granted against them, from financial institutions who sold them "unsecured" loans but then were allowed to "secure" the loan in default.

Therefore, if a restriction is placed for reasons such as, say, money loaned personally or for work carried out by a tradesman and not paid for; then maybe you should consider if the seller avoiding those debts upon sale is fair? 

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eggbox said:

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If the restrictions are standard form K and they have been complied with, then a creditor cannot prevent a sale from proceeding. What usually prevents a sale from proceeding, however, are the conveyancers acting for the sale insisting the restrictions are removed prior to sale. Has neither conveyancer mentioned the restrictions?

You also say one of the creditors "live close by", which sounds like an individual who is owed money by the seller? This thread is primarily concerned with advising people on the weakness of Form K Restrictions who have had a CO granted against them, from financial institutions who sold them "unsecured" loans but then were allowed to "secure" the loan in default.

Therefore, if a restriction is placed for reasons such as, say, money loaned personally or for work carried out by a tradesman and not paid for; then maybe you should consider if the seller avoiding those debts upon sale is fair? 

The conveyancer has mentioned the restrictions and has sent me the land registry form so I can see them myself. We are waiting to find out how the vendor will deal with the restrictions. But so far I understand that he does not want to pay them back. 

You are right that some of the creditors are individuals. I agree it is very unfair if they are not paid back. Which is why I assume they will fight to get their money back. 

My question remains though -  could they disrupt the sale between exchange and completion. Does anyone know the process for them to get their money back? Approach the vendor, the conveyancer, the land registry, the court? 

eggbox

The norm has always been for conveyancers to repay creditors, from the sale proceeds, at the point of sale. So any creditors would usually just expect the debt to be repaid when the sale occurs. The only way a creditor could put a spanner in the works if the conveyancer doesn't pass any proceeds from the sale, is to apply for a freezing order on the sale.

But these cost thousands of pounds and can actually incur costs on the credtor, if the order has been deemed by a Court to be unfair to the seller. As large debt collection companies never apply for freezing orders, its inconceivable an individual or small business would.

So the creditor is usually only going to be aware no funds are forth coming form the sale, when none actually are given to them. Unfortunately, for a creditor, Form K restrictions offer very weak security for their debt. And when a seller doesn't wish to pay the debt at the point of sale (and conveyancers are willing to assist that wish) its extremely difficult for the creditor to receive their funds. 

The debt will still exist, but at the point of registration (of the new owners details) overreaching occurs and the "beneficial interest" the creditor had in the debtors property, then transfers to the sale proceeds the debtor has received from the sale of the property. The creditor will then have to pursue recovery of the funds owed under the Charging Order, again, they have again through a Court. But any legal claim on the property a creditor previously had, has now been removed.

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Very helpful. Thank you eggbox. Looks like it’s good news for us as buyers, but deeply unfair for the creditors. Not quite clear what the point of a restriction is….