Charging Orders – What to Do Next…
Charging orders have, understandably, over the course of the last 10 years proved to be an effective way of enforcing an unpaid liability order for council tax. With a buoyant property market between 2002 and 2007, and financial institutions competing for customers, it was not uncommon for people to re-mortgage their property every 18 months to 2 years.
As a result, the average lifespan of a charging order was in the region of 12 to 36 months, meaning that a council could expect to see its money repaid in full within that timescale. This certainly proved to be a more attractive option than instructing a bailiff against a debtor who was cash poor (and equity rich) and ending up with meagre monthly instalments perhaps being paid over a much longer period (if they paid at all).
One of the knock on effects of the turmoil in the property market and indeed the economy as a whole, is that a significantly less proportion of people are remortgaging or selling their properties and accordingly the life of a charging order has been lengthened considerably.
This has resulted in councils accruing a “bank” of charging orders and a large amount of their money being tied up in such orders, which are currently sat on debtor’s properties and with no immediate prospect of being repaid. If you are in this position what can be done?
Your most effective option is to apply to the court for an order for sale in respect of the property concerned.
The court has discretion in every case as to whether to make an order for sale. Where the property is jointly owned, the court must have regard to the factors set out in Section 15 of the Trusts of Land and Appointment of Trustees Act 1996 such as the intentions of the parties in buying the house jointly, the purposes for which the property is used, the welfare of any minor who occupies the property and the interests of any secured creditor on the property. The leading case is Bank of Ireland Home Mortgages v Bell  which elaborates further on the court’s duty to consider all the factors concerned, but did hold that the principle the creditor should receive recompense for being kept out of his money remains a powerful consideration, in addition to the circumstances of the occupants of the property. In Westminster Bank v Rushmer  the court observed that it will be in the public interest to enforce charging orders generally because of the economic importance of ensuring that there is efficient machinery for the enforcement of debt obligations.
You are perfectly entitled to issue order for sale proceedings where you have a charging order, and in doing so, the court must not only have consideration for the circumstances surrounding the property and its occupants, but your right as a secured creditor to be paid the money that you are owed.
Stages in the process
There are various stages to go through as part of the preparation for, and conduct of, the court proceedings, each of which involve what might be described as “pressure points” and which can result in a debtor making contact and putting forward acceptable repayment proposals. Those stages are:
- The request for payment including a threat of proceedings via correspondence with the debtor, and it is normal that at least two or three letters are sent out to a debtor before proceedings are commenced.
- The issue of the proceedings.
- The hearing of the application.
- The possibility of a suspended order to allow the debtor to repay by reasonable instalments.
- The involvement of a bailiff to seek possession of the property if payment is not made.
- Actual repossession of the property to be sold and the debt realised from the sale proceeds.
The purpose of the exercise is of course to get debtors paying, and not to evict people from their home. In our experience satisfactory repayment proposals are agreed in well over 90% of cases without the need to ever have to actually repossess a property. In fact in our 12 years experience in dealing with these matters, we have never once had to sell a property on behalf of a creditor. In the vast majority of cases, satisfactory proposals are reached at a very early stage in the process.
It is therefore possible and indeed commercially viable to tackle a bank of non-paying charging orders by planning an organised process utilising the steps set out above. This can and should include at an early stage an opportunity for the debtor to give you full details of their personal and financial circumstances, so that proper consideration can be given to the appropriateness of a potential order for sale action. Cases can then be carefully chosen as being suitable for one or more of these stages.
- Despite any bad press there may have been recently, you are legally entitled to issue order for sale proceedings in respect of charging orders, particularly where no or no reasonable payments are being made towards the debt.
- It is likely to result in your debt being paid either in full or by agreed instalments.
- It is very unlikely that you will ever have to evict someone from their property.