201504 CM April

Legal Matters
EMMA EMERY IS A PARTNER AT FREETHS : emma.emery@freeths.co.uk
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Getting Your Money Back -
Charging Orders
In this month’s Legal Matters we give you an overview of another Judgment
enforcement method, Charging Orders.
YOU may have recently obtained a
County Court judgment against an
individual Debtor for an unpaid debt.
Despite this, the Debtor may still not
have paid the money back. What do you do next?
What is it?
If your Debtor owns property one option is
to obtain a Charging Order. The purpose of a
Charging Order is to try and secure the monies
that are owed to you by placing an entry at the
Land Registry on the Debtor’s beneficial interest in
the property.
Process of obtaining a Charging
Order
There is a two stage process to obtaining a
Charging Order:
1. You need to apply for a Charging Order on
a standard court form. The court will usually
consider the application without a hearing and if
everything is in order an Interim Charging Order
is granted by the court. The Interim Charging
Order can then be registered on the Debtor’s
interest in the property by way of Agreed Notice
(if the property is solely owned by the Debtor)
or by way of Restriction (if the property is jointly
owned by the Debtor and another).
2. The court lists the Charging Order application
for final hearing at which point the court will
either dismiss the Interim Charging Order
or make it Final either with our without
modifications. The Final Charging Order can also
then be registered on the title of the property.
An Interim Charging Order can be granted at any
time after the judgment falls due. The Charging
Order will be registered on the Debtor’s beneficial
interest in the property but not the joint owner’s
interest (should the property be jointly owned).
You have a Final Charging Order,
what next?
The purpose of a Charging Order is to try to and
secure the Judgment debt which is due to you plus
accrued interest and costs. This means that, should
the Debtor seek to sell his or her property (or in
some cases remortgage) and there is sufficient
equity in the property once prior chargeholders,
such as mortgage providers, have been paid in full,
the surplus sale proceeds can be used to pay your
Judgment debt either in full or in part.
One option then open to you, rather than just
sitting and waiting for the Debtor to sell the
property, is, if you are satisfied that there is
sufficient equity available to pay your Judgment,
to issue a claim for possession and sale of the
property. The granting of an order for sale is
discretionary but the Debtor will need good reason
as to why such an order should not be made and
he will need to convince the judge at the hearing
of the claim. If you obtain an order for possession
and sale then you can proceed to obtain a writ of
possession and send a High Court Enforcement
Officer to the property to take possession and you
can then market the property for sale. The court
will usually order that the prior chargeholders be
paid in priority from the sale proceeds and the
costs of sale will also be deducted from the sale
proceeds. If the property is jointly owned then you
will be entitled to the Debtor’s interest in the sale
proceeds (usually 50 percent) once these expenses
have been paid and these proceeds can be used to
pay your judgment debt.
Advantages of using a Charging
Order
• Your judgment debt effectively becomes secured
over the Debtors beneficial interest in the
property.
• It can be used alongside other methods of
enforcement i.e attachment of earnings or third
party debt orders.
• It is a relatively quick process.
• It is a relatively cheap process.
CASE STUDY –
After obtaining an Interim Charging Order,
the Debtor disputed that he had a beneficial
interest in the jointly owned property
because he had entered into a Deed of Trust
with his wife whereby he transferred his
beneficial interest to her to protect the home
from creditors. We successfully applied to the
court that the Trust was a sham solely to put
assets beyond the reach of creditors (s423
Insolvency Act 1986) and the final charging
order was granted. A claim for possession and
sale was subsequently issued and an order
for sale granted.
If you require advice on applying for a Charging Order then please contact us on the Legal Helpline.
www.freeths.co.uk
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48 April 2015 www.cicm.com The recognised standard in credit management