Charging orders are a critical element that property owners must understand. These legal instruments uniquely intertwine with your property, profoundly influencing decisions about property sales and financial planning.
This article aims to demystify charging orders, guiding you through their application process, implications on your property rights, and their long-term effects on your financial health.
Whether you’re facing a potential charging order or just seeking to be informed, this guide will provide the clarity and direction needed in navigating these often challenging waters.
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What Is a Charging Order on a Property?
If someone takes you to court due to an unpaid debt, you might have received a County Court Judgement (CCJ). This is a court order that:
- Warns you to make the payment in full by a particular date or
- requests you to agree to frequent payments over time in order to clear the amount you owe.
However, a charging order is a further order that the claimant can apply for after the issuance of a CCJ. This helps to secure the debt against a land or a property that you owe. So this means that from any future property sale, you will have to repay the debt.
The debt can also be enforced in other ways. This includes taking payments directly from your wages or by using bailiffs.
An order for sale is another serious order that a claimant may ask the court to issue. It is a legal order that asks you to sell your land or home fast in order to repay the debt. The money that comes from the sale will then be used to repay the individuals you owe.
If you own a home jointly (beneficial interest), the charging order might only apply to your share, typically 50%. This protects co-owners not in debt. If both owners are in debt, the creditor could target the entire property.
The creditor has the right to request an order on the entire house if both owners are listed on the CCJ. Also, keep in mind that when an individual is a joint owner but is not in debt, this makes it tough for the claimant to be granted a charging order that forces you to sell.
However, this is not impossible. So, always seek advice from a solicitor when it comes to situations like this.
Charging Order Application – Stage by Stage
Navigating through a charging order application involves two critical stages. It’s a process that can significantly impact homeowners in debt.
Firstly, the creditor. It’s a provisional measure to stop you from selling your home prematurely before the case is assessed properly by a judge.
- Hearing: Usually, there’s no hearing at this stage.
- Your Action: You get 28 days to object and potentially halt the final order from being issued.
But there’s more. The creditor will add this charge to the Land Registry. This step ensures the property can’t be sold off hastily. This register tracks ownership as well as other details of land across Wales and England.
If the debt is fully paid, you can request its removal from the Land Registry. This option provides a glimmer of hope for those who can settle their debts quickly.
The Final Order: Decisive Judgement
The final stage is the final order, decided by a judge. What happens here?
- Response Time: You have 28 days from the interim order to respond.
- Hearing: If you reply within this period, a hearing might be necessary.
- Non-Response: Failing to respond could lead to a judge’s decision without your input under the Charging Order Act 1979.
But there’s a twist. You might stop the final order if you’ve kept up with payments since the CCJ or if there’s no equity in your home. This stage is crucial, as it could lead to an order forcing you to sell your house. You can negotiate with the judge, adding conditions to protect your interests.
The creditor might even request interest on the final order. This will eventually increase the amount of debt you owe. So, this is why it’s wise to pay off the debt without any delay. Reaching out to a debt charity will be helpful as well.
When Can a Creditor Apply for a Charging Order?
Creditors can apply for an order right after the court issues the CCJ. However, before 2012, creditors were supposed to wait until a payment was missed in order to apply for the order. But this is no longer the case.
As a debtor, this means you need to be swift and strategic in your response. Understanding this timing is crucial for preparing an effective defence or negotiation strategy.
How Long Does a Charging Order Last on a Property?
In Scotland, a charging order can expire after 12 years. But in England and Wales, in these regions, charging orders hold an indefinite duration until the debt is fully repaid.
This difference in expiration terms adds a significant variable to your long-term financial planning and property management.
Can You Sell a Property with a Charging Order on it?
Yes. You can sell a house with a charging order on it. But this is only if there is sufficient equity in the home sale to repay the amount you owe, as mentioned in the CCJ. In most cases, this indicates that you can sell your house after a charging order is made on it.
However, if the main reason why you’re selling the house is to pay back the amount you owe to the creditor, consider taking up other debt solutions. This will help you to pay back the amount you owe while keeping your home.
However, it’s best to get some advice from a debt charity before you make the decision. Alternatively, feel free to fill out our online form, and our MoneyAdvisor team will guide you.
Some debt solutions available in the UK include:
This opens up possibilities for property owners looking to resolve their debts, but it also brings a set of financial and legal complexities. Understanding these nuances is crucial for making informed decisions about property sales under the shadow of a charging order.
In conclusion, charging orders are a critical aspect of property and debt management in the UK. Navigating through their complexities requires a clear understanding and strategic approach. As you ponder the implications of charging orders on your property, remember that informed decisions are your best defence in this intricate legal and financial maze.
Key Points
- Charging orders legally link a debt to a property, affecting decisions regarding property sales.
- It involves two stages – the interim order and the final order, each with specific implications for the property owner.
- This initial stage prevents premature property sales and can be challenged within 28 days.
- Creditors register the charging order with the Land Registry to formalise the debt attachment to the property.
- Possible through full debt repayment, necessitating a follow-up for removal from the Land Registry.
- Decided by a judge, with the homeowner having 28 days to respond, non-response can lead to judgement without their input.
- Homeowners can negotiate or challenge the final order based on payment history or lack of property equity.
- Creditors may request additional interest on the debt, increasing the total amount owed over time.
- In Scotland, they expire after 12 years; in the rest of the UK, they remain until the debt is fully repaid.
- Charging orders, following a court judgement, negatively affect credit ratings but can be improved over time with proper financial management.
- Once a charging order is placed, the associated debt becomes a priority, necessitating its settlement before other debts.
FAQs
You can request the removal of the charging order if you have fully paid off the debt. Typically, the creditor or claimant informs the Land Registry once the debt is cleared, leading to the order’s removal. However, it’s always wise to follow up to ensure this process is completed.
In Scotland, charging orders expire after 12 years. But in the rest of the UK, these orders remain effective until the debt is repaid. This means there’s no automatic expiration, adding a sense of permanence to these orders in England and Wales.
If the court does not finalize an interim charging order, perhaps because you convinced them otherwise, the debt remains. In such cases, creditors might turn to other enforcement actions, like employing bailiffs, to recover the debt.
Absolutely. Once a charging order secures a debt against your property, it elevates to a priority debt status. This prioritisation means it should be settled before addressing other types of debts. Clearing these priority debts is crucial before focusing on other financial obligations.