Charging Orders

[Amethyst]

First thing to note is a CHARGING ORDER DOES NOT MEAN YOU ARE GOING TO LOSE YOUR HOME.



The reality of charging orders is that Creditors can secure debts that they sold as unsecure, an unsecured debt has higher interest attached to it. Historically Charging Orders were a last resort for creditors as the Courts were reluctant to grant them.

There has been a significant shift recently though with a huge increase in applications for charging orders and the orders being granted by the court.

On Saturday 22nd March 2008 the Times reported"The Courts Service received a total of 92,933 applications in 2006, compared with only 16,014 in 2000. In 2006 the courts approved 72 per cent of applications from lenders to secure customers' debts against their homes, up from 60 per cent in 2000."

On Sunday 13th April 2008 the Sunday Mirror reported "An alarming 97,017 'charging orders' were made in 2007 - up from 66,911 in 2006."

The provisions of charging orders in the UK are under the Charging Orders Act 1979


What is a charging order?

• If a creditor has a county court judgment against you ordering you to repay a debt, they may be able to apply to the court for a charging order to enforce the judgment if you do not pay.

• A charging order gives the creditor security for the debt; in other words, the debt would become "secured" like a mortgage on your house, or other land.

In simple terms, a charging order creates a second/third claim on your property when it comes to selling. The first charge on a property is usually your mortgage which will be repaid first upon sale, then any subsequent charges, before you receive the final proceeds of the sale.



When can a creditor apply for a charging order?

The creditor can apply for a charging order if they have a county court judgment against you and:

• You have been ordered to pay the whole debt immediately or by a certain date, (this is known as a "forthwith" judgment) and have not done so, or will be unable to do so, in which case a charging order may be applied along side an order for installment payments.

or

• The court has ordered you to pay the judgment by instalments and you have missed one or more payments.

• If you have an order to pay the debt in instalments and are not behind on the payments the court should not make a final charging order. This is because of a very important case called Mercantile Credit Co Ltd v Ellis in 1987.
  

STAGE ONE – THE INTERIM ORDER

The creditor makes an application for a charging order and the court will make what is called an interim charging order if it is satisfied that you own, or have a part share (an interest), in the property in question. This is NOT the final order. An interim charging order is usually made automatically without a hearing and a date for a full hearing is set. A copy of the interim order will be sent to you by the court.


This should be done at least 21 days before the hearing date set by the District Judge. The hearing is for the court to decide whether or not to make the charging order permanent ('Final'). This hearing is likely to be held in the District Judge's private rooms.


The creditor will also register the interim charging order as a "caution" on your property with the Land Registry who should inform you of this in writing. This means you cannot sell the property before the hearing




STAGE TWO - THE FINAL CHARGING ORDER

The second stage is the court hearing in front of the District Judge. At this hearing the court will decide whether to make a permanent charge on the property. This is called a final charging order. If you object to a charging order being made final then you should send the creditor and the court written evidence stating why you object. You should do this at least 7 days before the hearing. This could be in a form of a letter of objection outlining all the arguments you have for why the charging order should not be made. This should be sent by registered post to both the creditor and the court.


If you do this then your arguments should be taken into account by the District Judge at the hearing. You should still go to the hearing and if you do not send any written evidence then it is vital that you go.


The court can refuse to make the charging order so you must serve a notice and go to the hearing. If you cannot attend on that date, contact the court for a different hearing date to be arranged. If you do not go, the charging order is likely to be made final by the court at the request of the creditor.

If the hearing has been arranged in another court, ask for it to be transferred to your local court. You can apply on an application form called an N244 explaining why you can't go to the hearing, e.g. due to the distance, travel or childcare costs. There is a fee for doing this, usually £35.




Can the creditor sell my home?

It is rare for the court to allow a creditor who has a final charging order to sell your home. Most creditors are prepared to wait for you to sell your home at some point in the future and to be paid out of the proceeds of the sale. If a creditor is not prepared to wait, then they can apply to the court for a hearing for an order for sale. It is up to the court to decide whether to make an order for sale or not.


The court can order a sale where:

• The debt is in your sole name and you are the sole owner.

or

• The debt is in both the names of the joint owners of the house.
• If the debt is in your sole name and the house is in joint names, the creditor gets an "interest" in the house once the charging order is made final. This means the creditor can apply to the court for an order for sale to realise their "interest" in your house. All joint owners (or a married person who is not a joint owner but has an "interest" in the property) should be part of the court proceedings so they can explain their case to the court as well. They should be sent a notice of the hearing and be allowed to attend.

At the hearing the court must look at the following:

• Is there enough equity in the house to cover any mortgages and the charging order debt?

• When you bought the house what did you buy it for? Is it intended as a long-term family home? Is it imagined that an elderly person will live there for their lifetime?

• Welfare of any children should especially be taken into account. Are there special factors such as age, disability or illness? There may be a need for stability at school. The effect on the children of moving house should be considered.

• If the debt is in your sole name, argue that it is not fair for the whole family to lose their home because of a debt belonging to one person.

The court should look at whether the interests of the creditors should outweigh the interests of the family. Argue that, under The Trusts of Land & Appointment of Trustees Act 1996, the court has discretion to say the family's interests outweigh the creditor's interests.



You can still make an offer of payment at this stage and ask the court not to order a sale as long as you keep up with the payments. You can ask the court to adjourn the order for sale proceedings, or to suspend the order.


Practise Direction PRACTICE DIRECTION CHARGING ORDERS, STOP ORDERS AND STOP NOTICES - This Practice Direction supplements Part 73
Civil Procedure rule 73 - PART 73 - CHARGING ORDERS, STOP ORDERS AND STOP NOTICES


Ref: Wikipedia / Insolvency Helpline

[CYNthesys]

Re: Charging Orders

I dont know if its still the case or not, but going back a few years a further charging order wouldn't be made if there were already 2 existing charges against a property, eg A mortgage and a secured Loan.
I dont know if its possible these days to have unlimited charges against a property

[Amethyst]

Re: Charging Orders

I read somewhere there were legally allowed to have 5 charges against a property, but i am trying to find relevant legislation to confirm this. Thinking it would be in the Land Charges Act 1972 but can't find any reference as yet. Land Registration Act 2002.

I'll continue adding to the first post on this thread with details of land registry processes, sale orders etc.

[TUTTSI]

Re: Charging Orders

I dont know if its still the case or not, but going back a few years a further charging order wouldn't be made if there were already 2 existing charges against a property, eg A mortgage and a secured Loan.
I dont know if its possible these days to have unlimited charges against a property

We have a mortgagae, a second mortgage and recently a charging order so i guess you can have at least 3.

[Jester]

Re: Charging Orders

Really can't see what they have to gain by getting a charging order if, for example, you have a mortgage and secured loan on your property which actually means the property is in negative equity. If it were sold off they would be third in line and therefore get nothing.

I feel that in most cases it is just a bully-boy scare tactic !!

[TUTTSI]

Re: Charging Orders

Yep I agree Jester, and we explained this to them and at the time offered a sum of money about 75% of the sum they wanted. They turned it down flat after giving them evidences of what the house was worth and they still went for a charging order. It did not make sense to us. They carried and took us to court for the charging order and bumped on more charges even though we showed them recent valuations on the house.

As far as we were concerned the house is dropping in value and as you say we will soon be in negative value if we are not already - so what was the point. We may also never move and this only becomes active if we do move - so when will they get their money after the 1st Mortgage is paid and the 2nd Mortgage is paid they will be very very unlucky me thinks.

It was a debt we owed for school fees where my daughter was being bullied by the teaching staff and I could not get her to school. She became ill and she suffered a trauma at their hands and she lost a few years of schooling which we paid for albeit the last term and a bit where she was histerical at the thought of going. This case had already cost us the same again in legal fees to try and fight them, but our lawyer said we should pay them as one small girls word against teaching staff was not going to work. They actually said in a letter to me that my daughter was a no hoper. Well to prove them wrong my daughter is now at Uni studying Animal Sciences and gained triple merit at her BTEC at college and is really enjoying it. So what do they know.

xx

[I am getting through]

Re: Charging Orders

Tuttsi,congrats to your daughter,I know how that feels my own son has learning difficulties and had problems at school,but he now has a full time job and can play any musical instrument he picks up ,so these teachers should be ashamed.

Back to the charging orders.

We have one on our property it went on in September,the judge made it clear that she would never force sale,but the bullies (EVERSHEDS) are still at it,last week they phoned at 8.30 pm and said it was urgent my husband got intouch with them,when he did it was to ask him to make an offer to clear the debt,of course we did not have around £6000 in our back pocket so that was out of the question.

We then got a letter from their solicitors yesterday saying that we have until the 3rd DEC 08 to pay the balance in full,what can we do we have no money just like that and that is why I am awake at this time,I cannot sleep.

We also have 1st credit trying to force bankruptcy by sending a stat demand which is now in its second court hearing,we are just praying it gets set aside,if not we will be forced to use the mortgage money this month to pay them to at least get the debt under £750.Its a right mess and I only pray it will get set aside. :tinysmile_hmm_t2:

[Amethyst]

Re: Charging Orders

Hi xxxxxx

With the charging order judgement was there any mention of installment, or do you have an installment arrangement set up/running with eversheds in the meantime ?

What have they threatened you will happen after the 3rd December, that they will go for a sale order ?

It is very unlikely they would get one even if they did go for it.

If you have the original order it would be of help and we can write to eversheds and tell them to get lost hassling you.



Re the stat demand - can you start a new thread up on it and put as much info as you can. Other than getting it below £750 is there any other reason it could be set aside ? Whens the second hearing ?

[TUTTSI]

Re: Charging Orders

Thankyou, 'I am getting through' kids sometimes have natual talents which school teachers are unable to identify if they do not fall in the right mould.

As Ame says, unless the original charging order was worded with any specific instructions then a copy of the charging order should be sent to that someone at Eversheds as the right and the left hands may not know what they are doing. It would be best if you could post the original charging order up omitting your personal details.

Also, I heard on the radio coming home the other evening that Mortgage Companies have to in these times be more sypathetic and alow peeps longer time to pay their mortgages before going for repossessions. So if by paying 1st credit to get the debt below £750, tthus avoiding bankruptcy, this will put you in arrears with your mortgage company.
http://www.legalbeagles.info/forums/...ad.php?t=13422

It would IMHO be best to phone your mortgage company and tell them you have a problem this month and would like to spread whatever the figure that you are going to be short over how ever many months....that you can physically afford to pay back. Also, with interest rates falling the monthly repayments should also be falling which should help you.


xx

[worriedandbothered]

Re: Charging Orders

I have been ina DMP for three and a half years, One of my creditors, to whom I owe most, took the matter to the County Court as I defaulted on one payment, I was made redundant. My DM company just asked me to forward the court papers and said they would deal with it. I let them. Since the CCJ I have not missed any payments. A few weeks ago I received a letter from the County Court where the judgement was issued, to say the proceedings were to be transferred to my local County Court. Last week I received a "summons" notice to say a charging order was being applied for. It gave a date (in January) and reason for the application. Reason was the length of time was too long (for repayment) Itis a substantial amount. I was the sole debtor. We own our (modest) property. I am two and a half years off retirement age. we do not plan to move house. I was very upset by this development and due to the wording of this document it gives the impression they are going to try and either get the court to increase the payment or failing this, try to apply for sale. My DMP advisor (today) says let them go ahead as it is very unlikely they will be able to order sale. However I am so worried by this, I dare not tell my wife. I was off work last yaer for six months diagnosed with depression. I accepted I was in "over my head" and tried to resolve the matter. Do you have any suggestions anyone?

[righty]

Re: Charging Orders

worried that's not really a good enough reason for them to seek the order unless they intend to enforce & that is an action which I doubt the court will endorse particularly if you have stuck to the previous agreement

[worriedandbothered]

Re: Charging Orders

Thanks for that Righty, I have spoken to my DMP advisor today, they say much the same, However I cannot find any record of myself receiving a Default Notice before the CCJ!

[EXC]

Re: Charging Orders

I came across this piece of case law for charging orders, that COs are not subject to the Limitations Act.

http://www.thomasmore.co.uk/ImageLib...Newsletter.pdf

CHARGING ORDERS

Mrs Mulhall argued unsuccessfully that the Yorkshire Bank was not entitled to enforce a charging order obtained consequent to a judgment debt. Following Ezekiel v Orakpo [1997] 1 WLR 340 (CA), there was no provision in the Limitation Act 1980 which affected the enforcement of the charging order by the bank. Mrs Mulhall was wrong to contend that the charging order could not be enforced because of the lapse of time. The enforcement of the charging order by normal means was not barred by s.20(1) LA 1980, and unlike the position under a legal mortgage, the creditor’s rights are not barred after 12 years because the holder of a charging order does not have a right to possession such that time can run against it under s.15, and extinction of title cannot therefore occur under s.17. It was not illogical that time limits should apply differently where a creditor already has a judgment. The parties’ rights had been established by court proceedings and the only outstanding question was one of enforcement. The chargor will only be permitted to redeem an equitable charge on terms of payment of all principal and interest outstanding under the charge, irrespective of any limitation period in s.20 LA 1980. There was no basis for discharging the charging order in this case since the bank continued to enjoy rights as a secured creditor. There is no limitation period for execution of a judgment other than under s.24 LA 1980, which does not apply to the making of a charging order. Yorkshire Bank Finance Ltd v Mulhall & anor

[2008] EWCA Civ 1156; [2008] 43 EG 195 (CS).

[righty]

Re: Charging Orders

All the more reason to fight the imposition of a CO at all costs & with any legal means available

[upndown]

Re: Charging Orders

Is there a difference between a caution placed on a property and a charge placed on a property. I know that for an unsecured creditor to place a charge on someone's property he has to go through the courts e.t.c. But if an unsecured creditor registered a caution on someone's property in 2002 would he not have to go through the courts or could he just place a caution without consent.
I know that the Land Registry must be satisfied that he unsecured creditor is entitled to place a caution on someone's property if they can prove that they are owed a debt, but still does a court procedure not have to be done, or is the unsecured creditor automatically allowed to place his charge without letting the debtor dispute?