Secured Debts - Charging Order List

John_Chip

Hello

I’m looking at buying a property (private cash purchase) that has multiple charging orders against it.

What happens if the monies owed, secured against the property, are more than the property is worth?

The breakdown looks something like this:

Bank / Mortgage Company – secured debts of = 80K
Local Authority (unpaid Council Tax) = 15K
Individual who actually got the right of possession and sale = 30K
Above individual’s legal fees = 10K

That all adds up to more than the property is worth – which was trashed by the owner and tenants.

The guy who has the right to sell it to recover his 30K says he is number 3 on the charging list. With the bank being at number 1.

And he would be looking at spending – by my estimate – another 20K at least to make the place habitable and saleable.

To me it looks like he will never get his money. The bank will get their 80K and there will be nothing left.

So – Is the charging list set in stone?
Are secured debts against a property ever negotiable?

The house is still technically owned by the person who has racked up the debts – so will they still be liable for any debts not cleared by the sale?

Thanks in advance

John

G_M

Provided the seller is using a solicitor, not doing the conveyancing himself, it's fine.

The seller's solicitor will give you (or your solicittor) a 'solicitor's undertaking' that the charges will be removed once the purchase money is received.

How this is done is not your poblem. It can be a combination of the sale money, the seller's savings, an agreement by the Chrge holder to write off the charge, whatever.

Solicitors are bound professionally by these undertakings, so the seller's solicior will not give the undertaiking unless he knows he can honour itt.

John_Chip

Yes - the guy who has the right to sell the property has a solicitor - me also.
What I am saying is the guy who is selling the property is number 3 on the charging list - and will never get his money because the property is worth much less than the debts against it.


I would like to buy the property for what it is worth - much less than the charges add up to - but see the guy who is selling it get his money - but as it stands with the bank owed 80K at the head of the queue he won't.


J

agrinnall

Why do you care whether the seller gets any cash from the sale or not? If it's that important to you then pay £145K for it, but if you want to get it at a bargain price then he's in negative equity and he'll never make anything back.

John_Chip

Well I wouldn’t pay 145K for something that is worth 80K

But generally how does the register of charges work?

Is it first to get on the list gets paid?
Or those owed the highest amount?

Who decides who gets what if the property sells for less than the debts against it?

The guy in control of selling it is number 3 on the list – if he isn’t going to get any money out of the sale then he won’t sell it – then what? It will just sit there going down in value with the charges still against it ?

John

davidmcn

Do those sums represent the current debts (rather than perhaps the original ones)?
It's also possible that there is an agreement among the creditors about how the proceeds are to be split e.g. that the first only has priority to the extent of the first £x - I'm only used to Scottish procedure so not sure how visible these things would be in England.

da_rule

The first charge will take priority and this will go on down the list. It's up to the seller and their solicitor to work out whether they can afford to clear all of the charges or come to some other agreement with the charge holders.

If they can't come to an agreement then the property shouldn't be sold.

You would hope that the seller has sorted all of this out before putting the property up for sale.

teddysmum

It does seem silly to accrue extra debt of £10 (for legal fees), when it's already unlikely that the sale will cover any of his original £30000 owed.This won't even go towards reducing the council's owed £15000,but will be wasted as income for the solicitor.

John_Chip

Thanks.


So - is there usually a timescale for the sale? How long can the guy with the possession order hang onto it for without selling it?

CIS

John_Chip wrote: »

Thanks.


So - is there usually a timescale for the sale? How long can the guy with the possession order hang onto it for without selling it?

Unless the sale is forced then it's a generally a case of wait and wait some more...