A Charging Order is a legal order that allows creditors in Britain to secure their debt against a debtor’s property, giving them a legal claim over the property.
This means that if the debtor sells the property, the creditor can use the proceeds to repay the debt owed.
A Charging Order can be used as a last resort by creditors to enforce repayment of debt.
What is a charging order and how does it work?
A Charging Order is a legal order in the UK that allows a creditor to secure a debt against a debtor’s property.
The creditor gains a legal claim or ‘charge’ over the property, which means that if the property is sold, the creditor will be paid from the proceeds of the sale, after any prior charges have been satisfied.
A Charging Order can be granted against any property owned by the debtor, including their home, investment property, or land.
The order can also cover both the debtor’s legal and beneficial interest in the property, meaning that the creditor can potentially claim any profit made from the sale of the property, even if the debtor has paid off their mortgage.
In addition to the debt owed, statutory interest may also be added to the amount owed, which can increase the amount the creditor can claim from the property.
The Charging Orders Act 1979 sets out the rules for the granting and enforcement of Charging Orders in the UK.
It also outlines the requirements that must be met for a Charging Order to be enforced, such as the need to serve notice on the debtor and any other interested parties.
What is the process of getting a charging order?
The process of getting a Charging Order in the UK typically follows the steps below.
Receipt of a County Court Judgment (CCJ)
The process of getting a Charging Order starts with a County Court Judgment (CCJ) being issued against the debtor for the unpaid debt.
The creditor must have already obtained a CCJ against the debtor before they can apply for a Charging Order.
Interim Charging Order
Once a CCJ has been obtained, the creditor can apply for an interim Charging Order. This is a temporary order that places a charge on the debtor’s property, effectively preventing them from selling or remortgaging it without the creditor’s permission.
The interim order can be granted without a court hearing if the debt is undisputed, or a hearing may be required to decide whether or not the order is appropriate.
The interim Charging Order will only be granted if the court believes that the creditor has a good chance of obtaining a final Charging Order.
Final Charging Order
A final Charging Order is granted at a later hearing if the debtor does not dispute the interim order or if the court is satisfied that a Charging Order is appropriate.
The final Charging Order has the same effect as the interim Charging Order, but it is permanent.
The order places a charge on the debtor’s property, which gives the creditor the right to seek payment from the sale proceeds if the debtor sells the property in the future.
Order for Sale
If the debtor fails to repay the debt, the creditor may apply for an Order for Sale. This allows the creditor to force the sale of the property to recover the debt owed.
However, an Order for Sale is only granted in exceptional circumstances, such as when the debt is large and the debtor has not made any effort to repay it.
The Consumer Credit Act sets out specific rules for the enforcement of Charging Orders related to consumer credit agreements.
For example, the creditor must have obtained a CCJ for the debt and the debtor must have failed to comply with the terms of a repayment plan.
Additionally, the debtor must have been given notice of the intention to seek a Charging Order and have had an opportunity to dispute the claim.
How do you prevent a final charging order from being lodged?
There are certain circumstances under which it will be more difficult for creditors to lodge a Charging Order against your property.
If you are up to date with payments for County Court Judgments (CCJs)
If you have been issued with a CCJ, it is important to make sure that you are up to date with the payments to prevent a Charging Order from being lodged.
If you are struggling to repay County Court money, you may be able to negotiate a payment plan with the creditor.
If you have little or no equity in the property subject to the court order
Creditors are less likely to seek a Charging Order if there is little or no equity in the property.
Equity is the difference between the value of the property and the amount of the outstanding mortgage.
If there is no equity, then the creditor will not be able to recover any money from the property.
If your creditors would lose money via final Charging Orders
If you can demonstrate to the court that your creditors would not recover any money from a Charging Order, then the court may not grant the order.
For example, if you have other creditors with higher priority charges on the property or if the property is jointly owned with someone who is not involved in the Charging Order debt, this may be taken into account.
It is important to note that taking proactive steps to manage your debt can help to prevent the need for a Charging Order in the first place.
This may include seeking debt advice, negotiating payment plans with creditors, or exploring formal debt solutions.
What happens after a charging order is placed?
The charge on the property means that when the property is sold, if there is enough money in the house, then the debt will be repaid.
Whether the creditor will accept a lower amount in full settlement of the debt could only be their decision. It may be worth contacting them to negotiate your terms.
If Charging Orders were placed on the properties before you went bankrupt, and those properties were not surrendered in the bankruptcy then the Charging Orders will remain on the properties post-bankruptcy and will not be discharged.
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How long does a charging order last?
The order will remain in place until you pay it off by either selling the house or using other means by which to pay it.
However, as long as you have enough equity in your property then having this charge should not affect your ability to remortgage.
Your conveyance may need to get permission from the Official Receiver.
Can my ex put a charge on my property?
It is possible for an ex-spouse or civil partner to put a charge on your property if they have a legal right to do so.
For example, if you were married or in a civil partnership and owned the property jointly, your ex-partner may be entitled to a share of the property.
In this case, they may be able to put a charge on the property to secure their share of the value.
Similarly, if you owed money to your ex-partner as part of a court order or settlement agreement, they may be able to put a charge on the property to secure the debt.
If you are concerned that your ex-partner may attempt to put a charge on your property, it is advisable to seek legal advice.
A solicitor can advise you on your rights and help you to take steps to protect your assets.
How does a charging order affect joint tenants?
A joint tenancy is severed by the making of a charging order against one of the owners. This means that the joint owners become tenants in common so that the debt can be secured against one party’s share of the property.
If this has happened then the other party’s share of the property will form part of their estate and will need to be dealt with accordingly by the personal representative. Please be aware that creditors need to be paid before any of the estate is distributed to beneficiaries.
How do I find out if there is a charge against a property?
You may need to ask this question in a forum dealing with property sales and purchases, a mortgage adviser, solicitor or conveyancer.
You can find out information about whether a mortgage or charges are registered against a property (but not the amount) by searching the Land Registry.
What happens to charging orders by previous owners?
Before you bought the house it may have had mortgages, charges, secured loans linked to it in relation to the previous owners.
If the previous owners were being chased for debts and a creditor tried to place a charge on their property it would be on the property they own now, not on a property that they used to own but now belongs to someone else.
You could check the details with the solicitor who helped you purchase the property.
How to remove a charging order from a property?
Removing a Charging Order from a property can be a complex process, but there are several options available.
Pay off the debt
The simplest way to remove a Charging Order from your property is to pay off the debt in full. You can contact the creditor to arrange payment or seek advice from a debt advice organisation.
Once the debt has been paid in full, the creditor will be required to remove the Charging Order from your property.
Apply for the original CCJ to be set aside
If you believe that the CCJ was obtained unfairly or without your knowledge, you may be able to apply for it to be set aside.
This can be done by making an application to the court that issued the CCJ.
You will need to provide evidence to support your claim, such as evidence of an incorrect address or that you were not properly served with the papers. If your application is successful, the CCJ and the Charging Order will be removed from your property.
Request that the Charging Order is removed
If you have paid off some of the debt, or have agreed on a payment plan with the creditor, you can apply to the court to have the Charging Order removed.
You will need to provide evidence that you have paid off some of the debt or that you have made arrangements to pay it.
The court will consider your application and may remove the Charging Order, suspend it or vary it to make the payments more affordable.
Wait for the Charging Order to expire
A Charging Order will typically expire after 12 years unless it is renewed by the creditor. If you can wait until the order expires, it will be removed from your property.
However, it is important to note that the debt will still exist, and the creditor can still pursue you for the money owed.
It is important to seek legal advice before taking any action to remove a Charging Order from your property, as the process can be complex and may have legal implications.
A solicitor can advise you on your options and help you to take the necessary steps to protect your property.
How do I remove a land charge on my property?
If the charge was originally an unsecured debt, and it is now secured, then it will be repaid when the property is sold. If there is enough money from the sale to allow this to happen, if not then some debt may still be left to pay.
If you pay off the debt then there will be nothing left to pay when the property is sold.
You could also ask the Land Registry about the removal of charges. You can contact the Land Registry via their enquiry form.
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What happens if the court grants an order for sale against me?
If the court grants an Order for Sale against your property, you still have options available to you. It may be worth taking the following steps into consideration.
Seek debt advice and legal counsel
It’s important to seek advice from a debt advice organisation or a solicitor to understand your rights and the options available to you.
A solicitor can advise you on how to respond to the Order for Sale and help you to take the necessary steps to protect your assets.
Attempt to repay any missed payments
If you have missed any payments on the debt, you should attempt to pay them off as soon as possible to reduce the amount owed.
Send evidence to the court/court officer
You may be able to challenge the Order for Sale by providing evidence to the court or court officer.
For example, you may be able to show that you are making efforts to repay the debt, or that the property is worth less than the amount owed.
Attend a court hearing
If the court decides to proceed with the Order for Sale, you will need to attend a court hearing.
The hearing will typically take place at the County Court Judgment debtor’s home court and will be presided over by a County Court or district judge.
You will have the opportunity to present your case and challenge the Order for Sale.
Await the decision
After the hearing, the judge will make a decision on whether or not to proceed with the Order for Sale.
If the judge decides to proceed, you will be given 28 days to pay off the debt or vacate the property.
If you are unable to pay off the debt, the property will be sold to recover the money owed.
