Charging Orders – Top 10 Tips
Charging orders remain the most successful way of enforcing any debt. This is particularly so now, when an improving housing market is likely to result in more sales and re-mortgages, together with increasing levels of equity.
Here are our top 10 tips to consider:
1. Charging orders are not generally available as a remedy of enforcing liability orders for business rates. However if you have identified a property owning debtor (individual or limited company) rather than obtaining a liability order, get a county court judgment using Money Claims On Line, which can be then secured by way of charging order.
2. A charging order is only as good as the available equity in the property. This can be readily estimated by comparing a valuation of the property using websites such as Right Move and Zoopla, with details of the mortgage balance(s) from credit report providers such as Experian.
3. Remember that where the debt is in the name of one of the co-owners of a property, the charge will only attach to their interest in the property. There is therefore only half the equity in the property available on which to secure that charge.
4. Applying for a charging order following a liability order is carried out by completing form N322B (application for an order to allow enforcement of decision), together with the charging order application itself on form N379. There is no fee for the transfer of the order from the magistrates’ court to the county court, and you only have to pay the standard £100 fee for the charging order application. Both forms can be submitted at the same time.
5. The date of the interim charging order determines the priority of the charge in relation to other secured charges on the property. Simply because a later interim charging order from another creditor is registered before your charging order does not give it priority. The secret here in avoiding any arguments is of course to get your interim charging order registered as quickly as possible. You do not have to register a final charging order as well.
6. The standard form of restriction available when registering an interim charging order against a single debtor’s interest in jointly owned property only requires the owners to serve you notice if they are selling the property. In other words they do not ordinarily require your consent before the Land Registry will remove your charge. Although relatively rare, this can result in the property being sold without your charge being paid. Unfortunately there is very little that can be done about it. When you are notified that a property is to be sold always supply a redemption figure and insist on payment in full before you will agree to remove your charge from the property.
7. The test for granting a charging order is relatively straightforward. Namely that there is an outstanding judgment and the debtor has an interest in the property concerned. The debtor ought not to succeed in disputing the charging order application by arguing that this gives a preference to you over other unsecured creditors. It is equally up to other creditors to secure their debt if they choose to.
8. Any argument that the debtor has no beneficial interest in the property because of a divorce or re-mortgage is not relevant to the issue of whether the charging order ought to be granted. It is only relevant to the issue of whether you are subsequently entitled to an order for sale.
9. If your charging order is made final prior to the date of any IVA or bankruptcy order, it falls outside the IVA or bankruptcy and you are a secured creditor. You should therefore not submit a proof of debt or engage in any of those processes. Beware of debtor efforts to adjourn the charging order application to allow an IVA or bankruptcy to proceed. This should be strenuously resisted. At the very least the court ought to leave the interim order in place whilst the meeting of creditors takes place in case the IVA is rejected.
10. If the debtor is being cooperative, for example agreeing a repayment schedule, it may be preferable to agree a voluntary charge on the debtor’s property. This can easily be achieved using form CH1 (available from the Land Registry website) and avoids the time and expense of court proceedings. Be aware that the registration of the voluntary charge may require the consent of existing charge holders and if this is not forthcoming, or indeed the co-owner of the property is uncooperative, then you may have no option but to proceed with the charging order application, which does not require anyone’s consent.
We hope these help but please do not hesitate to get in touch if you require any assistance.