Charging Order? The myth

Land_Registry · 21 January 2019 at 11:02AM

cb95amc wrote: »

@LRR

Unfortunately I did not get her name, the only thing I could tell you is that she was Welsh.
I'm guessing your systems wouldn't show who accessed that title number on Friday afternoon?

The reason for my call was to try and get written confirmation that the restrictions on the title would be overwritten once the sale completes etc....
I know it is written here, and I have also seen it written on your support forums, but I was hoping for something quoting the specific title number so I could make sure both solicitors have it.

Many thanks and understood. I had checked to see what record, if any, we might have but no details were forthcoming. We do not record every enquiry/point of contact made by phone.

A phone call would not normally elicit a written response. A written enquiry would but as suggested the Q being asked is not one I would expect a solicitor to have any difficulty with so I am unsure why it is being asked.

The issue they can have difficulties with is the one re it being overreached as in certain circumstances a Form K restriction may be cancelled automatically. This will be the case when a transfer is registered which overreaches the interest protected by the restriction because there has been a transfer for money by two or more proprietors to a third party.

Understanding who the applicant for registration or their conveyancer is should be clear to them as the applicant is a term referred to on the form AP1 (application form) which they would be using.

I'll feedback in general terms to our support team though to hopefully ensure that they all are aware of the Answer to that specific Question next time

cb95amc · 21 January 2019 at 11:18AM

@LRR

Sorry, I think I've caused a little confusion.....

As you suggest, the issue that the solicitor is having is around the restrictions being overreached.
In our case it does meet the criteria you mention, as we are joint proprietors selling to a third party.
It is confirmation of this that I was hoping to get a written response on, with specific reference to our title number.

The applicant for registration issue only arose because I couldn't even get as far as talking about the overreach topic because your representative was so adamant that it was the creditor that is the applicant for registration and I would therefore need their explicit permission to sell.

I have since submitted a written enquiry through your website, reference 190118-002719, and am awaiting a response.

Land_Registry · 21 January 2019 at 11:27AM

cb95amc - understood so let's see what response you get to your written enquiry

cb95amc · 25 January 2019 at 8:07PM

@eggbox

Here is the response from the purchasers solicitor, still insisting the form K restrictions have to be paid.... Your guidance would be appreciated.

I did read the information the seller provided and I have not referred to an equitable charge (I know a restriction is not a charge) although the beneficiaries of the restrictions do have an interest in the equity which is why they have tried to protect this interest by the restrictions. I repeat that I know the restriction can be complied with and that a new ownership registered. I would draw your attention to the below taken from the Land Registry’s practice guidelines regarding removal of the restrictions. You will note that restrictions can be cancelled by anyone “if the restriction is no longer required”. This would be on a form RX3 on which you have to state why the restriction is no longer required. However, I cannot guarantee that the reason “the house has been sold and the new owner is not the person referred to in the restrictions” is enough of a reason (or along those lines!). Therefore there is a big element of doubt that the Land Registry would be willing to remove the restrictions. It does state below that restrictions may remain despite changes in ownership.

I have never come across a situation where the seller is not willing to comply with the restrictions and I have come across restrictions on many occasions, and I am sorry but I cannot advise my client to proceed while they remain.

3.7 Removal of a restriction entry

3.7.1 Removal of restrictions

Restrictions may be removed from the register by:

· being withdrawn voluntarily by the appropriate people interested in the restriction (section 47 of the Land Registration Act 2002 and rule 98 of the Land Registration Rules 2003)

· an application by anyone to cancel a restriction that is no longer required (rule 97 of the Land Registration Rules 2003)

· being cancelled by ourselves if it is clear that it is superfluous (paragraph 5 of Schedule 4 to the Land Registration Act 2002)

· being cancelled by ourselves if it is a restriction entered in respect of a trust of land and we are satisfied the affected estate is no longer subject to the trust (rule 99 of the Land Registration Rules 2003); see practice guide 24: private trusts of land - Cancellation and withdrawal of restrictions for more information about cancellation of trust restrictions

Depending on its terms, a restriction may continue to have effect despite numerous changes of proprietorship, other dispositions and the lapse of time.

Someone intending to take a disposition of an estate or charge against which a restriction has been registered should therefore consider whether:

· the disposition will be affected by the restriction and, if so, whether they can comply with its terms

· the restriction may affect any later disposition they may wish to make

In appropriate circumstances they should take steps to ensure the restriction will be cancelled or withdrawn before committing themselves to complete the disposition.

eggbox · 25 January 2019 at 10:55PM

The Solicitor is quoting from section 3 of Practice Guide 19. You need tell them to look a little further down to section 3.7.5 bullet point 3

3.7.5 Restrictions cancelled without application

the restriction was entered to protect an interest that has since been overreached by the payment of capital money arising on a registrable disposition to the proprietors who have given a valid receipt (for example Form A)

You can further explain that the Land Registry explain this further in Paractice Guide 76 section 4 paragraph 3;

4. Application for entry of a Form K restriction

Entry of a restriction does not protect the priority of the interest to which it relates for the purpose of section 29 of the Land Registration Act 2002. A charging order affecting only the beneficial interests under a trust is liable to be overreached along with those interests by the operation of sections 2 and 27 of the Law of Property Act 1925. Accordingly, a Form K restriction will be usually be cancelled automatically, without application, when a transfer which appears to overreach the beneficial interests is registered.

You can explain that the Land Registry will confirm that a Form K Restriction becomes overreached as the restriction is against the debtors "beneficial interest" (equity) and which will have been released when the capital monies (sale funds) are paid. Hence, why it has to be cancelled.

You can also (politely) explain that, as with other sellers, you are complying with restriction; you are just choosing not to settle the debt at the time of the sale as there is no legal obligation for you to do so (if they disagree ask them to supply where it states the debt has to be be repaid to comply with the restriction?)

You can also (again politely) explain the reason the majority of sellers comply with a Form K Restriction and also settle the debt outstanding; is because the majority of Solicitors are unware of the limited power a Form K Restriction has since the Land Registry 2003 rules came into force.

eggbox · 26 January 2019 at 1:48PM

cb95amc

You can also point the Solicitor concerned HERE where the limitations of a standard Form K Restriction are explained by another solicitor.

puppet1984 · 6 February 2019 at 11:01AM

Hello,

Is the information contained in the first post still valid?
I am looking for information for my mother, the charge isn't against her but her husband (seperated).
I have removed identifiable information which i've placed in italics.
Thanks for any help anyone can give.

(21.12.2009) RESTRICTION: No disposition of the registered estate,
other than a disposition by the proprietor of any registered charge
registered before the entry of this restriction, is to be registered
without a certificate signed by the applicant for registration or their
conveyancer that written notice of the disposition was given to
Company data removed, being the person with the
benefit of an interim charging order on the beneficial interest of
Person Removed made by the Leeds County Court on Date 2009 (Court reference xxxxxxxx).
5 (09.03.2011) RESTRICTION: No disposition of the registered estate,
other than a disposition by the proprietor of any registered charge
registered before the entry of this restriction, is to be registered
without a certificate signed by the applicant for registration or their
conveyancer that written notice of the disposition was given to
Company removed, being the person with the benefit of an Interim charging
order on the beneficial interest of Persons Name made by
the Leeds County Court on Date 2011 (Court reference xxxxxxxx).

eggbox · 6 February 2019 at 12:01PM

puppet1984

Yes the information is still valid with the correction that it is the BUYERS responsibilty to notify the creditor and confirm (certify) to the Land Registry that notification has been given of the sale occuring.

I should also add (just in case anyone else skips from the first post to the last) that the bit about joint owners not having a Charging Order isn't correct, either.

A Charging Order is made against the debtors share of the equity (in the case of joint owner/single debtor) but it can only be registered on the deeds as a Restriction and not (as it would be in the case of a sole owner) as an equitable charge on the property.

puppet1984 · 7 February 2019 at 12:44AM

Excuse my ignorance:
So if the property is sold, they new buyer would have to notify the company named.
What would they then be able to do to recover their money?
Also 2 of the companies named have since been dissolved after a strike off. The other 2 are in a voluntary agreement, if that makes any difference.
Once the property is sold what happens to the monies owed?

Thanks

eggbox · 7 February 2019 at 10:02PM

puppet1984

Yes the buyer (or his conveyancer) are required to notify the creditor under the Restriction terms.

They have the same options as they did prior to the Charging Order being granted to try and recover their money. So if you're daft enough to purchase another house (under your name) then you'll most likely get another CO (and the creditor may also apply for a modified Restriction so be careful with the proceeds.) However, debt collection is a business like any other and, most likely, the creditor won't pursue you anymore as you're making it difficult for them to collect their debt whilst incurring costs?

It's only what is registered on the property deeds that has any weight when you come to sell. The position of the creditor would be of no concern as their Restriction would be removed as it would become overreached, in any event.

The monies owed are still owed to the creditor and the CCJ they obtained does not expire. So, technically, they can still pursue you whenever they wish? However, as mentioned above; debt collection is a business and, as such, they will prioritise easy targets before chasing someone determined not to pay on a, purely, business basis.

As its been a while since making this point (and for any new readers); this thread is not about trying to avoid debts on a wholesale basis. It's specifically targeted at lenders who offer "unsecured" loans and enjoyed high rates of interest because the loan was "unsecured".

Specifically, during the financial crash; those lenders who actively sought to double and treble interest rates for borrowers they could see could only afford minimum repayments. Through this destructive behaviour many people who never dreamed they would ever miss a repayment were forced into default.

Unfortunately, what they weren't aware of was that these , high interest, unsecured loans were allowed to be attached to a debtors asset with the aid of the Court system. Allowing the loans to become "secured" with no redress to the debtor on the high interest payments having been made. It's only this, unfair and unjust, type of lending that this thread is trying to redress.

Charging Order? The myth

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