Charging Order? The myth

eggbox

ChainBlackMail

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? 

ChainBlackMail

eggbox said:

ChainBlackMail

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.

ChainBlackMail

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…. 

Shine25

Hi got 2 restrictions registered against me and the hubby from 2009 . We are selling and sale is due to complete in 2 weeks. We have 2 so called final charge orderes with mortimer clark/reston solicitor and they have said these have to be paid. she has already contacted them to advise the house is due to be sold and they have emailed back with the amount they are wanting 6k. After reading the above posts it says restrictions dont have to be paid. Ive spoke to my solicitor and she said she will contact buyers solicitior to advise she has issued the certificates as listed in the restrictions on the land registory. But she doesnt think they will accept this please can anyone help ? 

eggbox

Shine25

If the information that the Land Registry guides provide are explained to the buyers solicitors; then there is no reason to pass all the proceeds to the creditor upon sale if you choose not to. This action does not prevent the sale) if the restrictions terms have been met) and the CO will transfer to the beneficial funds released from the sale.

You still owe the debt but the CO but its then down to the creditors to obtain their funds from you, however, that may be. Unfortunately, f the buyers solicitors are still resistant to do this, its because they choose not to help you, So you need your solicitor to explain the facts of the matter to the buyers solicitors.  

Shine25

My solicitor has advised if not paid they could end up taking me back to court and i coud have additional fees to pay. My argument is its from 15 years ago and they cant eveb provide me with al the details to prove the debt.

fatbelly

It's a shame that your solicitor could not have provided you with a more full response.

I guess that is what you get if you charge by the minute.

They have already started a court claim against you and won a judgement. They then tried to secure it against the property but found this limited as they were trying to get a sole debt secured against a jointly owned property.

They could try to enforce by bailiffs but this is fraught with problems after six years even if they could provide a copy of the original judgement to a court.

They could try attaching to your earnings if you are employed and they know where you work.

They could try dipping into your savings if they know where you bank

They could petition for your bankruptcy if you owe more than £5000

In all these things you have a right to respond, and a judge would have the final say. Any attempt would require them to invest more time and money on this which they could only add to the debt if successful.

That's what your solicitor said, but I've fleshed it out a little

Shine25

Thanks for your reply do i just suck it up and pay or refuse to pay and see what happens. Its an old credit card debt that they ended up securing with a charge order/restriction. I wish i dealt with this back in the day. 

eggbox

Shine25

It's up to you if you decide to suck it up or not. If you don't want to pay the debt you have to instruct the solicitors to pass all the sale funds to you. If they aren't willing to act on your behalf, then you need to use different solicitors. Unfortunately, that's the only way it will get done.

But to add to what Fat Belly said, the reason debt collectors won't take you back to Court is because they've already gone down that route and its not returned anything. So, as a business, they'll understand its most likely throwing more money at something that is extremely unlikely to bear fruit.

To understand why they don't chase, the main reason is they bought the debt for a max of 10% on the original debt amount that you owe. If you don't pay, they know they've got, literally, thousands of other debtors they will get money from. So they'd rather use their time and money in that area as its a business decision, not a personal vendetta to get you to pay.

I sold our property and did the legal work myself. The debt collection agency that held my ex wife's CO was Restons who are one of the most ruthless of the bottom feeders out there. They didn't even respond when they received notification of the sale (as has to be done). So while its possible for Creditors to take you back to Court, the overwhelming stats show they never do for the reasons given.