I’ve Obtained a Final Charging Order: What Happens Next?
A charging order is a powerful way in which a creditor with a court judgment against you can secure the debt against a property you own. Even if you own your home jointly, a creditor can secure their unpaid debt against your share or interest.
A charging order is extremely serious, and a claim for an order for sale can follow afterwards and usually will if we’re acting for a creditor. It means you could potentially lose your home if you fail to repay the debt.
We act nationally in locating and enforcing debts against assets, including forcing their sale where necessary to improve our clients’ position. This article considers both stages of a charging order and what a creditor can do next.
What a Final Charging Order Means
A final charging order means that if you sell your property, you must repay your creditor from the proceeds of the sale.
Ahead of this, the court typically issues an interim order to stop you from selling or remortgaging your property without either paying the creditor or obtaining the creditor’s consent.
A final charging order doesn’t mean you must sell your property, but it means that if you do, you are legally required to repay your creditor.
However, a creditor can immediately apply to the court for an order for sale, forcing you to sell your property.
A creditor will typically enter an UN1 application to the Land Registry (HMLR) after an interim order.
A UN1 is a unilateral notice on the title register of your property to protect third-party interests. The Land Registry put an entry in the Charges Register, which appears alongside any mortgages or secured loans.
The other option open to a creditor to protect their position is an RX1 restriction, a form of conditional protection that typically requires the creditor’s consent to dispose of or sell the property. An RX1 must be used rather than a UN1 when there are multiple legal owners of the property or there is a restriction on the register of title.
Both options differ in how they work legally, but both serve to notify the Land Registry and third parties (including potential buyers) that certain rights exist over property and land.
Any buyer of an asset or property seeks clean title. To achieve this, if the property is being sold by the debtor, they (or their conveyancer) need to give notice to the creditor of a contemplated sale, in accordance with the UN or RX1. On receipt of such notice a creditor is made aware of a potential dissipation of the proceeds of sale. We are frequently instructed in this context to seek undertakings (legally binding forms of promise) that the vendor debtors solicitors will pay us on behalf of our client creditors, from the proceeds of sale. In this way we prevent the debtor receiving the money from the sale, but not paying what they owe. If undertakings are not received we then apply to the court for an injunction, additionally then seeking to recover our client’s costs in addition to the debt. These can be incredibly urgent and important steps- our commercial and property litigation teams handle this type of work routinely, in disputes and property, nationally.
From Interim to Final: The Court Process
An interim charging order is typically a precursor to a final order. The process broadly follows one route, with some slight variations.
After you are served with an interim charging order, you’ll have 28 days to object. Objections must be in writing and sent to the creditor and the court.
If you don’t object, a judge will consider the final order without a hearing.
If you object, there will be a hearing at the local county court, where the judge will decide whether to proceed with a final charging order.
The court may already have arranged a hearing when it made the interim charging order. You’ll need to send any objections to the court at least seven days before that hearing.
At the hearing, the judge will consider your evidence and objections and look at the counterarguments from the creditor. The judge balances the evidence from both sides before making a final decision.
If you have missed instalment payments or don’t attend the hearing, the judge is likely to make the order final.
A charging order is not automatic, and the court retains discretion over whether to grant one. Generally, courts are unlikely to grant a charging order where the debt is very small, as the costs and consequences of securing a debt against property would be disproportionate. Although there is no strict statutory minimum, creditors rarely pursue charging orders for debts below £1,000, and courts may refuse applications for minimal sums.
Enforcement After a Final Charging Order
A creditor has options to recover their debt, including applying for an order for sale and seeking enforcement in the High Court.
A creditor may not take steps if you have agreed to an instalment plan and are up-to-date with payments, or if conditions restrict them.
If there are no conditions or if you default on a payment plan, a creditor may immediately apply for an order of sale, forcing you to sell your property.
Claiming for an Order for Sale
Once a creditor has a final charging order they can issue a claim seeking an order for sale. There will be a hearing that you and any other joint owners must attend. Legal representation is vital.
You will be able to submit evidence to seek to stop the order from being granted based on personal and legal arguments. Evidence from a co-owner who is not party to the debt is relevant, and the judge will consider how selling the property will impact everyone who lives there.
We routinely obtain orders for sale of property.
You can still offer to pay the debt at the hearing and request that the court doesn’t issue the order, provided you keep up with the payments. Other options include the court postponing or suspending an order for sale based on specific conditions.
Debtor Protections and Opportunities to Object
Objecting to a final charging order, requesting conditions to be attached to it, and presenting your arguments usually require professional legal representation to obtain the maximum benefits and protection.
If you’re not sure what to do, you may be entitled to ‘breathing space’. Breathing space is a government-backed debtor protection scheme that allows you a window to decide what action you need to take. It’s a free scheme, though some debt advisers may charge.
If you’re eligible, you could be given 60 days of breathing space, during which your creditor cannot contact you or take action to make you pay, such as an order for sale.
You’ll also be able to pause any interest or charges being added to the debt. Not everyone is necessarily eligible for a breathing space.
It’s vital to take professional debt advice and understand the implications of a breathing space, as well as what’s involved, to protect your interests and make the most use of the extra time available.
You may be able to prevent a final charging order if the creditor didn’t serve the interim charging order correctly, something that your legal representative will check.
The creditor must send you a copy of the interim charging order within 21 days. A copy must also go to any joint owners of the property. Procedural irregularities are an opportunity to stop or delay a final charging order.
If you have multiple creditors, it’s also possible to argue that it would be inequitable for just one creditor to be awarded a charging order when the others haven’t. Perhaps the other creditors felt this wasn’t necessary, which could be a basis for arguing that one isn’t needed now.
You could also present an argument to say that a charging order is unfair to a joint owner or those living with you, who would be severely affected if you had to sell your home. This is especially relevant if you have children or are caring for elderly or disabled family members.
Managing Risk and Limiting Financial Impact
The best way to manage risk and limit financial impact is to either repay the debt in full or negotiate a manageable payment plan with your creditor.
Legal representation as early as possible will protect your interests regardless of how bad the situation is. At Helix Law we act for creditors and debtors in trying to either force recovery, or minimise the impact of debt and litigation, on your personal assets. It might be that there are legal or technical arguments you arent aware of that we can use to improve your position.
Writs and Warrants of Control
An alternative method of enforcing an unpaid debt is to apply to the court for a writ or warrant of control. This may be used by a creditor where the sums owed are insufficient for a charging order and order for sale to be appropriate, or alternatively if you don’t own property.
A warrant or writ of control allows a creditor to instruct enforcement agents (formerly known as bailiffs) to attend your property and seize goods to satisfy an unpaid judgment debt. The type of enforcement available depends on the value of the debt and the court in which the judgment was obtained.
In the County Court, a creditor may apply for a warrant of control, but this is only available for debts under £5,000. For debts of £600 or more, a creditor has the option of enforcing in the High Court by obtaining a writ of control, which is often preferred as High Court enforcement is generally quicker and more effective. However, if the original judgment was made in the County Court, the creditor must first apply for an order to transfer the judgment to the High Court before a writ of control can be issued.
If you are facing enforcement action, it is essential to understand which court is dealing with your matter and what powers the enforcement agents possess. Contact Helix Law today to discuss your position and options.
Frequently Asked Questions
How Do You Discharge a Final Charging Order?
A final charging order is discharged when you pay the amount you owe. You’ll need to apply to the court for a formal discharge with evidence of payment. The court will issue a certificate of satisfaction so you can change the information in the Register of Judgments, Orders and Fines and at the Land Registry. You will then also need to contact HM Land Registry to request that it update the register of title for your property.
How Long Does a Charging Order Last on a Property?
In England and Wales, a charging order lasts until the creditor is fully repaid, including any statutory interest; there is no expiry date. It’s essential to formally apply for discharge when you have repaid the debt.
Final Charging Orders Expose Homeowners to the Risk of Forced Sale
Receiving an interim or final charging order is a serious situation. Your home may be at risk of being sold without your agreement, and the charging order may result in notices/restrictions being placed on your property’s register of title, potentially preventing a sale. It is imperative that you take legal advice quickly to understand and protect your position.
The experienced team at Helix Law offers practical and professional representation, no matter how bad your situation is. We can advise you on your position, negotiate with your creditor, challenge a charging order, and represent you at hearings. The sooner you contact us, the quicker we can help. Get in touch with Helix Law today.
