Charging Order? The myth

Free_queen

I thought I should warn all persons regarding the changes to Charging Order Rules - Section 93 post 01/10/12

My husband is the subject of a CCJ dated 01/10/12.


Following this CCJ he was the subject of a Charging Order application by Nationwide the Judgment creditor for a credit card default. This was despite making regular instalment payments via DMP for three years. It is Nationwide Building Society's policy to have all debts paid within 5 years although they do not make this clear and will continue to take your money and then pounce on you with a CCJ and then subsequently a charging order which u will have to pay for so adding to the debt.


The charging order was defended just recently in a local court and despite all instalments being up to date, the judge did not take this into account nor did it matter that other creditors would be prejudiced.


So I write this with WARNING that all credit card borrowing unless it is under £1,000 will put your property at risk if u own one and subsequently cannot pay it or lose your job.


Although DMP companies can delay the ultimate, they cannot stop it as once a CCJ is in place the creditor can apply for the CO straightaway and from experience a judge is highly unlikely to reject it.


It is however less likely that a judge will order a sale if an instalment has not been missed so I would definitely keep instalments in place either yourself or a DM company when being threatened with the initial CCJ under the new rules.


In conclusion I think this is bad news for creditors and debtors alike as where a property is jointly owned and the debt in one name, then the CO is entered as a restriction only and is worthless to a creditor although they might argue otherwise.


A restriction does not force you to pay a creditor upon transfer of title and does not require their permission in advance of a sale but again they will try to argue the toss and this is where a good conveyances comes in.

There is protection to judgment debtors in that if instalments are up to date that the judgment creditor may not be granted an order for sale whereas pre oct 2012 this was not the case.


So a VERY VERY cautious warning to all potential homeowners who have credit card debt as it can be secured against your property.




I now wonder what the OFT and government think of this and it is only 4 months since the changes.


My thought is that there will be more homeless so putting pressure on local councils to rehouse!

yellowduck_2

well this has put the fear of God into me, I currently owe Nat West just over £5k and every six months they threaten me with a charging order I pay them £50 a month which is all I can afford and they write to me every 6 months saying that this "temporary arrangement" has expired and demand the whole debt upfront which of course I cannot afford. I write to them and explain that I am still in the same job and on the same wage and they agree to accept £50 all over again. So I am guessing from the above post that in theory they could pounce at any time and get a CCJ followed by a Charging Order even tho I have never missed a payment? Bit scared and worried!!!

eggbox

yellowduck

I think your fears are fairly groundless if you are paying £50 a month for a 5k debt. The main reason you get the demands is to try and attempt to get you to pay more. Its also doubtful that NatWest would move on a CCJ/CO for a 5k debt as they have just been rapped on the knuckles by the OFT for doing so (see HERE)

And whilst Free queen has given some facts regarding the changes, other factors have to be understood to balance the effect of the changes. The first is that if installments are being made then the Judge still has to take this into account before deciding whether to grant a Final Charging order. So it's not automatic that a CO will be given (but I would expect one unless your repayments are fairly high!)

Orders for Sale are also just about impossible to get now on Family and Primary residencies hence creditors don't try. Even the MOJ now accepts there is case law against OFS and site the three cases below in their latest CO assessment paper that decided on the £1000 limit;

• Caselaw - 'Mesher' type orders – provides protection as long as a minor is resident at the property concerned. The use of such orders was confirmed by a ruling in the case of Harman vs. Glencross 1986. Further powers are provided in the Trusts of Land and Appointment of Trustees Act 1996.
• Caselaw - Royal Bank of Scotland vs. Etridge 2001 - This case established the precedent that, where a joint loan has been taken out by, with a jointly owned property as collateral, such as the matrimonial home, it is incumbent on the lender to explain to all lendees at the time of signing the potential consequences of default. In this case it was ruled that one party had signed the forms without being informed by the lender of the possible consequences and that the Royal Bank of Scotland did not have the legal right to enforce by way of charging order.
• Caselaw - Bank of Ireland Home Mortgages vs. Bell 2001 - This case established the circumstances in which an order for sale would be granted, even if it concerns a family home. The equity available on the property must be sufficient to pay off the judgment creditor and all other interested parties and still leave enough money to adequately rehouse the debtor and dependent.

So it needs to be understood that CO's are an attempt by creditors to secure and also prioritise their debt rather than making you try to sell your house.


And whilst this thread is attempting to back up what Free queen is stating regarding a CO on jointly owned property, a Restriction isn't currently useless as buyers conveyancers are currently insisting the CO's behind the Restrictions are paid off before sales are completed. Land Registry Representative has clarified the current rules regarding this area and it backs up this threads assertions. Its getting this information across to conveyancers is where effort is required.

Calm29

Hi
I am finding this thread hard to understand I own a property in joint names with my wife she has restrictions on the property registered by credit card companies. I would like the mortgage transferred to my soul name as part of the divorce .the mortgage company consent and so does she but how can the restrictions be removed?

eggbox

Calm 29

It's a slightly tricky one because as things stand, your wife's debts are "secured" by way of a Charging Order on her financial interest in the property. So, legally speaking, the size of the debt she owes her creditors is not hers to give away while she is registered as an owner of the house.

I'm sure Land Registry Rep will clarify the following a little better, but the other problem you have is that your wife's share can't just be given away or transferred while the Restrictions remain on the Land Registry. This is because the Land Registry wouldn't see a transfer of Equity as "overreaching" the Restrictions that were in force.

However, if you were to sell the property to a third party, and for value, then the interests of that third party override the interests of the creditors Restrictions on the Land Registry and they are removed providing the Restrictioner has been notified of the sale.

Whilst the creditors have to be notified of the sale, you can time it to ensure that any equity released is divided how you want before any claim by the creditor is made on it.

Land_Registry

Any restriction would need to be complied with if it caught the transaction being registered. So if the restriction said 'No disposition....' then it would catch the Transfer.

You don't state which restrictions are registered (see Practice Guide 19 for a list of standard restrictions) but if they are to protect charging orders against your wife's debts then they are likely to be in form K

As eggbox states over reaching and therefore automatic cancellation is only likely to occur if you notify the restrictioners as explained in the wording of the restriciton and then transfer the property for value to a third party. In any other circumstance you would most likely need to apply for the restrictions to be cancelled, with evidence that they have been over reached, or withdrawn by the credit card companies themselves

terryw

An interesting answer to a question posed in "Ask The Experts" in the Mail on Sunday Personal Finance.

http://www.dailymail.co.uk/money/experts/article-2294774/ASK-THE-EXPERTS-Can-sisters-debt-leave-half-house.html

The penultimate paragraph confirms the views held in this thread - it is nice to see the word is spreading! -

"In this case, there is no automatic obligation for the creditor to be paid from the proceeds of a sale.
The only requirement is for the conveyancing solicitor to tell the creditor that a sale has occurred, and the lender would have to try to recover their debt from your sister’s share of the proceeds"


The last paragraph is worrying though
"But in practice, a buyer is likely to demand the restriction is removed before completing the sale, which would mean paying the debt in full"

This is the problem that many MSE posters are finding.

eggbox

At least the thrust of this thread is now being quoted in the "respectable" media. Hopefully, as these facts are more and more understood by buyers and sellers alike then the insistence by conveyancers to have Restrictions removed prior to a sale will diminish as being unnecessary.

An interesting point is made on this thread HERE on the priorities a conveyancer should be taking on board when dealing with a sale of a property. This conflicts with a lot of Solicitor (conveyancer) actions we have seen related on this board by sellers not getting this help from people who are supposed to be acting on their clients best interests.

Land_Registry

Regular posters and indeed new ones may be interested in a new Practice Guide 76 - Charging Orders which has been published by Land Registry.

The guide gives advice on the points to consider when considering making an application for entry of an agreed or unilateral notice or a form K restriction in respect of a charging order.

Whilst the guide deals with the protection of the charging order on the land register rather than what this means for the registered owner(s) some of the contents e.g. section 5 may be of wider interest.

eggbox

Thank you for pointing this out LRR.

Hopefully, this clarification will be of particular assistance to sellers with Restrictions having obstacles put in front of them by conveyancers insisting the CO should be paid off prior to a sale.