Charging Order
Where a debtor owns property e.g. a house, it is possible to get your Judgment secured by a charging order on the property. This gives you similar rights to those of a mortgagee. Once you have got the order you can then apply, by a separate action, for the sale of the property. An order for sale is rare.
The Procedure
Obtaining a charging order is a two-stage procedure. We make an application on paper and without notice to the debtor. The court grants an Interim Charging Order and sets a date to consider the case again. The charge is registered and HM Land Registry and the debtor is told about the appointment. At the hearing the court grants a Final Charging Order. This again should be registered.
What Property Can You Charge?
You can get a charge on the debtor’s interest in: –
- Land
- Government stock
- Stock of any body (other than a building society) incorporated within England and Wales
- Stock registered in a register kept within England and Wales even though the body is incorporated outside England and Wales
- Unit trusts
- Funds in court
- Any interest under a trust
Is It Worth It?
It is usually only worth getting a charge on a property if there is equity in it – i.e. it is worth more than has already been borrowed.
Most land is registered at HM Land Registry. It is possible to get a copy of the title and see what charges are registered. The title does not show how much has been borrowed or what the property is worth although more recently the price paid is shown.
You can take advice on the value of the property. You can make an application for an information order to find out the amounts borrowed.
Charges may give the right to make further advances or may cover variable amounts e.g. an overdraft in which case even if there is equity now, there may not be later.
Share In A House
It is also possible to get such an order where the debtor only has a share in the property e.g. where he owns a house jointly with his wife. The charge will then be on his share of the property and not on the property itself and is much less secure. A restriction will be entered on the debtor’s title to say that notice must be given to the creditor but if that is done a sale or charge of the property can be registered. It’s up to the people selling, often a husband and wife, to pay you!
Enforce By Sale
Once you have a charging order you can enforce it by an application to sell the property. If an application to sell the property is subsequently made the costs will depend very much on whether the application is opposed, for example by a wife with children in the home. In one case sale was postponed for 10 years until the debtor’s children became of age.
Some creditors automatically apply for a charging order, rather than instruct the HCEO etc., and find that the debts are paid off reasonably quickly because the debtor does not like having the charge on the property.
Instalment Orders
A debtor who cannot pay the amount due under the judgment may apply for an instalment order. A charging order can be granted even if the defendant is paying under an instalment order but the court won’t allow a sale unless the defendant defaults on the instalments.