Charging Order? The myth

Land_Registry · 1 April 2015 at 1:47PM

eggbox - you recall I was not referring to the 'real world' but to the registration process only.

The point I made in my post was that to achieve a sale and for the buyer to register without applying to remove the equitable charge is extremely unlikely to ever happen for the reasons your own 'respondee' mentions.

The end result might be that any sale is blocked but let's say for the sake of argument it was a cash buyer, so no mortgage, you have immediately removed one issue so the choice is then yours as the buyer. The equitable charge does not stop you buying or indeed registering your purchase. So I would disagree that the claimant can block the sale BUT in reality no sale is likely unless the removal of the equitable charge can be secured.

As far as form CN1 is concerned then that is correct re supporting evidence being needed but the creditor for example could also complete the CN1 and in essence consent to it's removal. I did not go into any great detail re the CN1 aspect as that was not the context of the original post.

Land_Registry · 1 April 2015 at 1:53PM

philb82 wrote: »

Thanks to you both Eggbox and LRR.

Although the Nationwide debt is in my name and the mortgage is in joint names I still intend to pay it off from the sale off the house. I have decided to do this although from what I have read that isn't necessary because this is classed as a Restriction.

We want to sell and move with no debt and start afresh :j

LRR - may I just ask a question about something you said, sorry if I seem a bit thick but this is the first time we've ever sold a house so bear with me

Who sends the application for the form CN1? Also is this isn't submitted and the charge is left on the register, does that mean it will still be present on the register even with a new owner in the property?

Thanks Phil

I would expect the CN1 to be submitted along with the application to register the purchase. The consent of the beneficiary to the equitable charge's removal is only likely to be given after the creditors' share of any sale monies have been dispersed and the debts paid off.

How that is achieved is not something we are directly involved in but clearly each are mutually dependent on the other happening so this is invariably done by the solicitors involved as the monies move between them and other affected parties.

I would imagine that as part of the conveyancing process your solicitor undertakes to pay off the existing mortgage, the secured loan and any other debts in return for the required discharges and Form CN1.

The buyer's solicitor transfers the funds, your solicitor complies with each undertaking and gets the discharges/CN1 which are then passed on to the buyer's solicitor to register the new ownership and remove the existing entries.

After that has happened I assume you get any remaining monies from your solicitor. You solicitor though will be able to confirm or explain far better than I aas we are at the end of the process.

eggbox · 1 April 2015 at 2:52PM

Land_Registry_representative wrote: »

eggbox - you recall I was not referring to the 'real world' but to the registration process only.

Hi LRR, I do understand. The poster had stated that a creditor could block a sale if his debt wasn't repaid in full. But I was explaining if there was not sufficient equity in the property then "in the real world" the creditor would take what was available and, as you state, consent to the removal of the charge on this basis.

I doubt you have had any experiences where a creditor, on the above basis, would refuse to remove the charge?

Land_Registry · 2 April 2015 at 7:57AM

eggbox - we simply would not know when a creditor refuses to remove their noted charge as if they did then the sale is unlikely to proceed so there is no actual application to change the register.

I suspect, but would not know, that a creditor may well 'curt their losses' in some cases but that's simply from reading online forums and noting that some creditor's may take the view that something is better than nothing.

Debt/Credit is not the specific area we deal with but we do deal with the registration and protection of such interests, as well of course their removal/cancellation. Ho a debtor/creditor though approach such things or indeed how a court might view them are therefore beyond our remit as I know you appreciate

DAKOTA45 · 2 April 2015 at 8:24AM

eggbox wrote: »

Hi LRR thanks for the update.

Another question if I may? Where a creditor has an equitable charge registered on the deeds (as for a sole owner but second to a mortgage); is it possible for that creditor to block the sale of the property, by notifying the Land Registry it objects to the sale, if the equity in the property, when being sold, is not sufficient to cover their charge amount?

This question appears to be popping up on some boards and there doesn't appear to be any info on what rights the creditor, with an equitable charge second to a mortgage, has? My understanding was they could only block by applying for a freezing order?

I am pretty sure that there is a correct & legal procedure to enable a creditor block a sale if he thinks he won't get his money, but my mine just took matters into his own hands and threatened my buyers 3 days before exchange of contracts, causing them to withdraw…:(

DAKOTA45 · 2 April 2015 at 8:32AM

By the way… "Charging Orders- The Myth"… was this the title of the paper written by Blake Lapthorn?

I can't find the details anywhere… seems to have been removed from the web.

eggbox · 2 April 2015 at 1:46PM

Dakota

I'm sure I downloaded a copy somewhere but it was called something like "when is a charging order not a charging order?". The reason they have (probably) withdrawn it is because they have, inadvertently, let the cat out of the bag on what was (again probably) an unknown piece of information regarding the new LR 2003 rules?

But I stress against that it didn't contain anything that has not been explained on this thread. It largely referred to then fact a Restriction (form k) could easily be removed as long as the buyers side had notified the creditor they were purchasing the property. The main gripe was the removal of the 14 day notification period which, as they moaned about, meant the house could be sold and money exchanged and dispersed elsewhere before the Restriction holder had time to get out of bed.

DAKOTA45 · 3 April 2015 at 7:42AM

eggbox wrote: »

Dakota

I'm sure I downloaded a copy somewhere but it was called something like "when is a charging order not a charging order?". The reason they have (probably) withdrawn it is because they have, inadvertently, let the cat out of the bag on what was (again probably) an unknown piece of information regarding the new LR 2003 rules?

But I stress against that it didn't contain anything that has not been explained on this thread. It largely referred to then fact a Restriction (form k) could easily be removed as long as the buyers side had notified the creditor they were purchasing the property. The main gripe was the removal of the 14 day notification period which, as they moaned about, meant the house could be sold and money exchanged and dispersed elsewhere before the Restriction holder had time to get out of bed.

Ahh yes..that was the one!!

As you know, they got a JO for the standard form k restriction against my property and then more than 4 weeks later made an application to get a 14 day caution added to it, which resulted in a second JO against me.

I am sick of their dirty tricks… it has been a feature throughout the period of litigation with documents not being served on me..rules waived or broken, etc., they even emailed their client's legal costs of more than 40k to me 12 hours before the hearing.. all done to make sure I didn't sleep before I gave evidence...I had no idea that a few months legal advice for what was a very simple case would amount to anywhere near that much!! Of course, they put a 100% uplift on top because they say they had entered into a CFA… neither I or the court were ever made aware of that fact!!

Anyway, I applied for set aside and will be saying that the 2nd charge is unlawful and invalid as they were out of time when they made the (without notice) application, and that in any case they should have made it clear that they would be seeking to modify the CO prior to, or at the hearing for the final CO, or in any case up to two weeks after, CPR 28 4.2(2) The court will assume for the purpose of any later application that a party who did not appeal and who made no application to vary within 14 days of service of the order containing the directions was content that they were correct in the circumstances then existing.

Probably wasting my time but I just can't let them treat people in this way...

I don't even feel that I should owe the costs as the judgement creditor did not 'win' his case as such… I had to give up at the hearing because I am deaf and was unable to participate under cross examination and the vile judge refused to adjourn.

Definitely a violation of my rights under ECHR act...:(

eggbox · 3 April 2015 at 8:07AM

Dakota

Keep us informed when the hearing is due and make sure the court is made aware well in advance of the hearing of your hearing disability.

The costs sound horrendous but can I ask how much the eventual CO was made for in total and what sort of equity you currently have in your property ( there is a reason I ask)

DAKOTA45 · 3 April 2015 at 8:16AM

I came across this… written a few years ago… so what, if anything has changed?
Very interesting and something the Govt should get onto especially with an election looming…

Why are charging orders such a hot topic right now?
September 2010

LITIGATION ENFORCEMENT

Charging orders are a hot topic at the moment due to the publication of two reports on the subject in the past year. The first report is titled ‘Out of Order’ and was published by the Citizens’ Advice Bureau in June 2009. It noted an increase in charging order applications (from data provided by the Ministry of Justice) and voiced concern over the way it felt successful orders are sometimes used in the debt collection process. In fact, more recent Ministry of Justice statistics indicate that the rate of charging order applications is decreasing. The second report is titled ‘Orders for Sale’ and was published by the Ministry of Justice in February 2010. That report is a consultation paper, which invited comment as to whether Parliament should prescribe a minimum level of debt before the creditor can make an application for an order for sale. The consultation period has recently ended and we look forward to receiving the Ministry of Justice’s comments in the near future.

Are they being used in some areas of finance more than others, for example, mortgages, car finance or credit cards?

The statistics from the Ministry of Justice focus on unsecured debt and do not categorise whether judgments debts arise from fixed-sum loan agreements or running account credit card agreements – or indeed any other financial product. However, in our experience, charging orders are widely used throughout.

What is the political climate around the use of charging orders? Are litigators expecting the new government to tighten the rules setting out when they can be used?

As mentioned above, statistics from the Ministry of Justice indicate that the rate of charging order applications is already decreasing. In addition, it is not so much the fact that charging orders are being obtained that is the main focus of discussion; it is the way in which they may be enforced. This is because a final charge holder has the option of attempting to enforce the charge by applying to the court for a forced sale of a debtor’s property. However, far more commonly the creditor will wait for the property to be sold in the normal course of events thereby naturally realizing its security. In addition, the Conservative Manifesto, as part of David Cameron’s “Big Society” plan, was explicit that no person should be made to sell their home for unsecured debts of under £25,000. There is therefore a possibility that the Government will introduce a protective limit in applications for orders for sale, which may cause a further reduction in applications.

Are lenders wary about previous criticism over the increased use of charging orders (made by the CAB in 2009, I’m told)?

The main issue the CAB report focuses on is the way in which charging orders may be used in the debt collection process [enforcement]. Lenders and their solicitors already implement Treating Customers Fairly (TCF) codes of conduct when conducting litigation. Notwithstanding these TCF policies, lenders must continue to be aware that unfair debt collection practices may have licencing consequences if the Office of Fair Trading finds that a lender has adopted unfair debt collection practices (i.e. using a threat of an order for sale to bully a payment or cause duress to the debtor). In that case, the OFT could apply to remove the lender’s consumer credit licence so that they are unable to undertake lending activities.

Charging Order? The myth

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