Charging Orders can only be obtained against debtors in England and Wales. If you have recently raised a County Court Judgement against a sole trader or an individual debtor and they have not paid, you can then ask the court for a Charging Order to be raised against the debtor. This is a different way of enforcing your County Court Judgement, other than using Bailiffs, High Court Enforcement Officers and Bank Arrestments etc, which are all other methods you can use if they still refuse to pay.
What is a Charging Order?
If the Sole Trader or individual debtor owns their own property an option open to you is to obtain a Charging Order. The purpose if a Charging Order is to try and secure the monies that are owed to you by placing an entry with the Land Registry, and then essentially making your unsecured debt, secured against their property. So if there is any change in the Title Deeds for the property I.E It is sold or remortgaged, after the Mortgage or any other secured lending has been settled, then you would be legally entitled to any balance to repay the debt owed.
How do I obtain a Charging Order against my debtor?
There are two stages to obtaining a Charging Order –
- You will need to apply for a Charging Order on a standard court form. You can review this form using the following links to the Government’s Money Claims Service Website – https://www.moneyclaimsuk.co.uk/PDFForms/EX325.pdf and http://hmctsformfinder.justice.gov.uk/HMCTS/FormFinder.do the number of the form you require is N349. The court will usually consider your application without a hearing, and if they consider everything to be in order an Interim Charging Order will then be granted by the court. The Interim Charging Order can then be registered against the Debtors interest in the property by way of an Agreed Notice (If the property is solely owned by the debtor) or by way of a Restriction (If the property is jointly owned).
- The court will then list the Charging Order application for final hearing. At this point the court will either dismiss the Interim Charging Order, if your debt has been repaid, or make it Final either with or without modifications. Once the court has awarded you the Final Charging Order you can then proceed to have this registered on the Title Deeds of the property, thus then making your unsecured debt, into a secured debt.
Please be aware that The Charging Order will be registered only on the debtors beneficial interest in the property. So if the property is jointly owned it will not be registered in anyway against the other owners interest.
Now I have my Final Charging order what should I do?
The main purpose of a Charging Order is to try and secure the debt you have a County Court Judgement for, plus any interest and costs against the debtors property. This means that should the debtor try to sell the property or remortgage it for any reason, if there is sufficient equity in the debtors property once any other charges have been paid such as mortgage or secured loan providers, any surplus sale proceeds can be used to pay your County Court Judgement debt in full or part of it depending on the amount of surplus left once the other secured lenders have been paid in full.
Creditors may have to wait a long time for the debtor to remortgage or sell the property as they will be aware of the Charging Order and may be reluctant to do anything as they would then have to pay you. Another option open to you rather than waiting for something to happen is, if you are satisfied that there is enough equity present in the property to pay your County Court Judgement, you can issue a claim for possession and sale of the debtors property.
The granting of an order for sale is at the courts discretion, however the debtor would need a very good reason as to why the order should not be made and would need to stand up in court in front of a judge at the hearing of the claim. If the judge rejected the debtors claims and granted you an order for possession and sale then you can obtain a writ of possession from the court and send this to High Court Enforcement Officers to take possession of the property. You could then put the property on the market for sale.
The court will normally request that any other charges against the property be paid first, Mortgage Lenders and or Secured Loans from the sale of the property. The costs of selling the property, solicitors and estate agents fees will also be deducted from the sale of the property.
If the property is jointly owned then you will be entitled to the debtors interest in the sale of the property. This is usually 50%, but can sometimes vary. Once all these expenses have been paid then any surplus will be used to pay the balance of your County Court Judgement including interest and costs.
What are the advantages of using a Charging Order?
- Your unsecured debt now becomes a secured debt against the debtors property
- You can use the Charging Order with other methods of enforcement like, bank arrestments, arrestment of earnings and attachment of goods using Bailiffs or High Court Enforcement Officers
- It’s a cheap, quick and effective way of enforcing your County Court Judgement
- You stand a good chance of getting paid if the debtor has a lot of equity in the property its very unlikely they would let a sale of the property go ahead as they may stand to lose too much