Charging Order? The myth
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Hello all
My son and his wife jointly own their house which is mortgaged and they are paying this on an interest only basis. This mortgage represents about 70% of the current value.
Due to there being a second charge on the property which I hold (I lent them some money a few years ago) which is NOT being paid in any way and which attracts interest there is no real equity in their property and no real likelihood of there being any in the near future. for the record I am NOT bothered in the least about getting any money from them for the loan I made him (he's my son!) and if in future he wants to sell etc I will walk away from my money (£65k + interest)
He got into trouble buying another property to rent out and could not keep up the repayments. He handed the keys back and eventually got a CCJ (presumably) and charging order / restriction for the outstanding balance which is some £88,000.
There is no interest being charged on this £88000 and he is making token payments of £40 a month, so will be clear in about 190 years then...!
The second charge precedes the restriction / CO.
I have told him they cannot touch him or get an order for sale (3 grandchildren, 7,9 and 12)
However the thought of this hanging over him has made him get very down about it all and he just wants it to go away.
To effect this he has written to the mortgage company that have the CO/ restriction and offered them firstly 5% then 10%then 12.5% of the £88000 to settle it fully and finally.
They have point blank refused each time.
He has been to stepchange who seem to think they can do this with one of their 5 year plans but I am unsure that a debt of this size or nature can be put into their programme, or indeed, hat the creditor HAS to agree to it.
What's the best way forward?
Thanks in advance
Mark0 -
Sorry, for the record the rental property was in his name only, the family home is in joint names.0
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and the restriction at the Land registry reads as follows:
(XXXX.2010) 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 XXXXXXXXXXXXXX at care of XXXXXXXXXXXXXXXX, being the person with the benefit of an interim charging order on the beneficial interest of XXXXXXXXXXXXXXX made by the XXXXXX County Court on XXXXXXXXXXXXX 2010 (Court reference XXXXXXXXXX).0 -
bobbymotors
Can I ask what the £88,000 debt is made up of and who its owed, too?0 -
The £88000 is the amount owing on the rental property he bought and is the amount left over now that it has been resold.
it's probable that creditors look at these forums so I will pm you the name of the mortgage company.
However if those who know better think its fine to say the name then of course I will.0 -
bobbymotors
No its not necessary to name them I just meant was it to the mortgage company (which you confirm it is.) I was just struggling to understand how your son lost £88k on a house sale but if he has he has? But you are right there is no chance of an OFS happening simply on there being no point given the fact you have such a large charge taking priority. So for now he has no worries and is lucky you have a charge taking priority.
I understand your son wants the debt to be over but, unless he makes some hard decisions, a debt of that size isn't going to go away easily. When the property reaches the point of being able to repay you from the equity it would probably be the time to sell as the creditor then has nothing to "secure" its debt on as the Restriction they have will be removed when he sells. (and even if that happens, he will have to make sure any other assets he then has aren't "available" as they would most likely go after bankruptcy if they are discovered?)
What may be an option is for him to write back to the creditor offering the 10% offer previously made (not the 12.5% offer as you may be able to bargain with this) explaining to them that if they don't accept he will be selling up and they will receive nothing as a) there will be no equity after the mortgage and second (your) charge is repaid and b) they only have a Restriction which you explain how and why it is removed as being overreached.
It may just get them to understand that the "security" they have is not the security they might have thought they had? It certainly won't hurt to try this to see there reaction?0 -
He did indeed lose £88000... I advised him to leave it alone but you can't put an old head on young shoulders!
The thing about letting them know about their restriction and a possible sale is that this will surely clue them up to what might be intended. There is also the problem of finding a solicitor prepared to tell the creditors the news at the appropriate time rather than just insisting they have to be paid, although if needed I'm sure we could find one by PM on here or some other way.
Also, although it is only a restriction should the law ever change then a proper charging order would mean they could actually prevent a sale taking place if their CO was unpaid.
to be quite honest I'm quite happy to write off my second charge if necessary, it's only money and I'll be dead one day!
Also I'm pretty sure they are aware of my second charge and that's probably why they have done nothing regarding forcing a sale as £88000 isn't peanuts!
I do wonder why no interest is being applied. In correspondence they have 'reserved' the right to apply this.
If they did sell up and buy elsewhere can the creditor put a CO / restriction on their new property?0 -
Yes, any assets he owns are fair game. Which is why I advised "caution" if he did sell up.bobbymotors wrote: »He did indeed lose £88000... I advised him to leave it alone but you can't put an old head on young shoulders! No you can't but hopefully he understands more now!
The thing about letting them know about their restriction and a possible sale is that this will surely clue them up to what might be intended. There is also the problem of finding a solicitor prepared to tell the creditors the news at the appropriate time rather than just insisting they have to be paid, although if needed I'm sure we could find one by PM on here or some other way. You want them to know that YOU know the Restrictions powers and how easily it is removed to get them to realise that what you offer is more than likely ALL they will ever get! The issue of repayment only becomes a problem for Solicitors if they are withholding money from the creditor. If there is non to withhold there wont be any issue for them
Also, although it is only a restriction should the law ever change then a proper charging order would mean they could actually prevent a sale taking place if their CO was unpaid. If the Law did change (which it won't) it wouldn't be retrospective. Registrations on property deeds prior to the new 2003 rules are not affected by the new changes.
to be quite honest I'm quite happy to write off my second charge if necessary, it's only money and I'll be dead one day! If it was only money you wouldn't be taking the time to help your son on here
Also I'm pretty sure they are aware of my second charge and that's probably why they have done nothing regarding forcing a sale as £88000 isn't peanuts! No, its because they know they won't get an OFS given your son's family circumstances
I do wonder why no interest is being applied. In correspondence they have 'reserved' the right to apply this. That is a strange one but there is possibly a reason for why they haven't applied for it? But if they can and do apply for it that would definitely be the time for your son to sell up.
If they did sell up and buy elsewhere can the creditor put a CO / restriction on their new property?0 -
Yes, any assets he owns are fair game. Which is why I advised "caution" if he did sell up
In which case a simultaneous further second charge on anywhere they move to would seem to be in order!
IF they move house though, can my son give his (at the time) unencumbered share of the new property to his wife as a 'gift of love and affection' between husband and wife? (I think it's called that)
I really don't understand why they seem reluctant to settle - 20 years of repayments up front to call it off seems sensible to me.
If it was only money you wouldn't be taking the time to help your son on here
It's only his money I'm bothered about, not mine.
They are aware of the lack of equity and the second charge. I really am at a loss to know what to do to get them to settle sensibly.
We shall see...0 -
..........bobbymotors wrote: »In which case a simultaneous further second charge on anywhere they move to would seem to be in order! IF they move house though, can my son give his (at the time) unencumbered share of the new property to his wife as a 'gift of love and affection' between husband and wife? (I think it's called that) There are various ways you can ensure your son's share is protected but if his name is on the deeds they will, most likely, try to gain a CO on his share. So you need to work around that.
I really don't understand why they seem reluctant to settle - 20 years of repayments up front to call it off seems sensible to me.They aren't expecting to receive payments from your son for the next 20 years; they are expecting him to sell up and move at some stage and recoup their loss then (as CO statistics reveal that is what usually happens.) That is why you need to explain what you know regarding their "security" and why they really should take his offer.
They are aware of the lack of equity and the second charge. I really am at a loss to know what to do to get them to settle sensibly. They may be aware that is the situation now but CO's are long term solutions to getting repaid so they won't be in any rush (or have any need) to settle on your terms. That, again, is why you want to get them to understand what you know. Plus, always remember to put "WITHOUT PREJUDICE" at the top of your letter when you make the offer again.0
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