Charging Orders - A useful guide

If you have obtained a judgment there are a number of ways in which you might want to secure or enforce it. One possibility is by way of a charging order. This article sets out the basic facts about charging orders and how they can be a useful tool in enforcing a judgment.

What is a charging order?

A charging order usually secures a judgment over a debtor's interest in land, although it is possible to secure a charging order over other assets such as government stock or funds in court.

The stages to obtaining a charging order can be a little slow but a charging order can provide effective future security. There are three main stages in applying for a charging order;

  • The initial application to court for an interim charging order – this is a paper application;
  • A hearing to decide whether a final charging order should be granted;
  • The possible enforcement of the charging order by sale over the assets to which your charging order relates.
It is also of the upmost importance that the charging order is registered at the Land Registry in order to protect your interest. This protection should be applied for as soon as an interim charging order has been obtained.

Is obtaining a charging order the right process for us to follow?

If the judgment debtor has a property with equity in this may be an ideal way of enforcing your judgment debt. In addition interest on the charging order will continue to accrue from the date of judgment to the final return of monies. Points to consider include:

  • Is your judgment debt immediately enforceable?
  • Who owns or lives in the property?
  • Will any other party object to a charging order being granted?
It should be noted that even if the court decides that the debtor may repay the judgment debt in instalments this does not prevent the creditor applying for a charging order, regardless as to whether the instalments are maintained or not.

Enforcing your charging order and obtaining an order for sale

In order to enforce your charging order the amount of the debt due and owing should be at least £1k. The court will take into account a number of factors when considering whether to grant an order for sale including:-

  • Is it likely that the judgment debt will ever be satisfied?
  • What is the value of the asset to be sold?
  • Who lives in the property?
  • The conduct of the judgment debtor
  • The size of the judgment debt
Just because a property may be occupied does not mean that a court will not grant an order for sale. There is a balancing exercise to be undertaken before any order is granted which will depend upon the individual facts of the case.

Potential pitfalls

  • A charging order will rank lower than a prior charge on the property register. If there are a number of charges already on the property in question then it may be that there is no equity left to satisfy your charging order.
  • A charging order does not necessarily mean you will be able to realise funds to satisfy that debt, it only provides in the first instance for some limited security
  • A charging order does not necessarily prevent someone from selling the property over which you have a charging order. If the sale is by a mortgagee in possession there may not be sufficient equity to pay all of the charges registered against the property in full.
We have a number of experts who can assist you to make the right choice in enforcing your debt. Often, obtaining judgment is just the first step. Should you require any advice in relation to obtaining a charging order please contact Beverley Lambert or Linda Fisher who would be pleased to assist you.

Posted on 02/03/2015 by Ortolan

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