A charging order turns an unsecured debt into secured debt and can only be applied for if the debt is subject to a judgment (a CCJ or other court order) and is over the limit (currently £1,000). The order can be made against your home or any other land or property you own.
- If you own your home in your sole name, then the charging order will be made against the whole property. This is sometimes called a ‘notice’.
- If the properly is jointly owned and the debt is in your sole name, the order will be made against your beneficial interest in the property, often called a ‘restriction’. When the property is sold, the debt should only be paid out of your share of the equity.
- For judgments made before October 1st 2012, the creditor can only apply for a charging order if you have defaulted on your monthly installments agreed with the court.
- If the judgment was made on or after October 1st 2012, a charging order can be made even if you have not defaulted on your installments, however, the court must take into account the fact that you have not defaulted.
- The process for applying for and recording charging orders is set out in Part 73 of the CPR and supplemented by Practice Direction 73.
The creditor starts by applying to the court for an interim charging order. This application is made without notice and is intended to stop you from disposing of the property while the final charging order is made. The application will include details of the following:
The court will then send you a copy of the application form N379 and the interim charging order along with details of the final charging order hearing. They should give you at least 21 days notice before the hearing.
The creditor applies to the Land Registry to register a restriction on the property and they will also forward you a copy of the registration. This is intended to stop you from attempting to sell the property before the final order is made.
An interim charging order can only be made final at a hearing, where the judge will decide whether to make the order final or discharge it altogether. In practice, most applications for charging orders for judgments made after October 1st 2012 succeed, however, you should still attend the hearing and put forward your objections.
If the debt is in your sole name but the property is owned jointly, the order can only be made against your share in the property, known as your ‘beneficial interest’. This gives you additional protection against the possibility of a creditor applying for an order for sale and can also be used as an argument against the charging order being made final at the hearing. If the property is subject to divorce proceedings, and adjournment should be requested while the matter is dealt with by the divorce court.
Any objections to the order being made final should be made in writing and sent to both the court and the creditor at least seven days before the hearing date. Attach any relevant documents such as details of other creditors, both secured and unsecured, as well as your financial statements and anything relating to you or your family’s circumstances.
Some arguments that can be put forward include:
It is possible to apply for conditions to be attached to the final order, this can be done at the hearing, so it’s worth attending even if the order is still made final. You can point out to the court that, when making a charging order final, it should consider the possibility of enforcement via an order for sale.
Conditions that can be attached to the order are intended to stop the creditor from applying for an order for sale as long as you keep up your repayments or as long as there are children living in the property.
An order for sale is a court order to force you to sell your property to repay a debt secured on it via a charging order. Charging orders for debts that were originally unsecured do not give the creditor the right to start possession proceedings like secured debts do. Judgment creditors cannot repossess your home but, at least in principle, can apply to the court to force the sale of the property.
An order for sale can be regarded as draconian and disproportionate to the amount of the debt. The court is likely to take into account circumstances such as:
An order for sale application will always be decided at a hearing and it is vital that you attend the hearing. If you receive notification of an application for an order for sale, you should return the acknowledgment of service within 14 days along with a statement of your intention to oppose the application and your grounds for doing so.