Enforcing a Charging Order: A powerful tool for debt recovery

If your debtor owns property, then obtaining a Charging Order against that property and taking steps to enforce it, can prove a very successful tool in recovering your outstanding debt.

To apply for a Charging Order you need to have first either obtained judgment in the County Courts or a Liability Order in the Magistrates Court.

Applying for a Charging Order

The application is made in writing to the Court attaching a copy of the Title Register for the property showing that the Debtor is either the sole or joint owner of the property and a copy of the judgment order or liability orders.

If the application and evidence in support, are completed correctly and comply with the Civil Procedure Rules, then the Court will make an Interim Charging Order.

Serving and registering the Interim Charging Order

Once the Interim Charging Order is received, it needs to be served on the Debtor and any co-owners of the property along with any charge-holders or other parties who have a restriction, notice, charge registered against the property.

The Interim Charging Order can be registered against the property by way of an application to the Land Registry.

Final Charging Order

Certificates of Service and a Certificate of Continuing Debt are filed at Court and then if no objections have been received to the Interim Charging Order, the Court will make a Final Charging Order. If an objection is received from the Debtor or other interested parties then the Court will list the application for a hearing at which the Court will decide whether to make the charging order finalised.

Once a Final Charging Order is made, it again needs to be served on the Debtor, any co-owner or registered charge-holder and can be registered at the Land Registry.

Can a Charging Order force the sale of the property?

It is often believed that once a creditor obtains a Charging Order against a Debtor’s property, then it is simply a waiting game until the property is sold by the debtor at some future date but this does not have to be the case.

It is possible for a creditor to take steps to enforce the Charging Order and ultimately obtain an Order for the sale of the property. 

Court discretion on Orders for Sale

The Court does have discretion when considering whether to make an order for the sale of the property. In cases where there are children living at the property or where the debtor is vulnerable, then the Court may be reluctant to make an order for sale. However, where the property is only occupied by the debtor or by other adults, the Courts are willing to consider making an order for sale.

There is no minimum sum for an order for sale except where the debt falls under the Consumer Credit Act where there is a threshold that provides that a regulated debt cannot be less than £1,000 if the charging order is to be enforced by an order for sale.

The factors which the Court will consider when considering whether to make an Order for Sale include:

          ● the amount of the judgment as against the current value of the property;

          ● the conduct of the debtor e.g. whether they have made any payments;

          ● any other methods of enforcement available to enforce the judgment.

If the debt has been outstanding without any instalment payments being made and all other enforcement methods have proved unsuccessful or are not applicable and the debtor has made no real effort to co-operate, then providing there is sufficient equity in the property, it should be possible to obtain an order for sale.

What happens after an Order for Sale?

An order for sale provides a set period by which payment must be made (usually between 14 to 28 days) for the debtor to pay the Judgment debt in full, failing which they must provide vacant possession of the property. If after the deadline, the debtor has not paid or vacated the property, then the next step will be to apply to the Court for a Warrant of Possession which means that the Court bailiffs will fix a date and time to take possession the property. Once you have possession of the property, you can then market and sell the property and from the proceeds of sale all prior charge holders will be paid and you will then be paid your Judgment debt and the costs of sale. It is also usual to obtain a costs order in relation to the costs of obtaining the order for sale which can then also be paid from the proceeds of sale and then any balance left can be paid to the debtor.

Can I obtain a Charging Order alongside other enforcement methods?

It is possible to apply for and obtain a Charging Order whilst also applying or utilising another enforcement method. For example, you could enforce a Judgment by obtaining a Charging Order and obtain a warrant for bailiffs/enforcement officers to attend the Debtor’s Property to seize goods or obtain payment. If the judgment is satisfied in full, then any restriction or notice registered against the property will need to be removed.

If the Debtor is paying the judgment by instalments, it is still possible to obtain a Charging Order but it will not be possible to enforce the Charging Order if the instalment payments are continuing and being made on time.

Charging Order legal advice

Our Debt Recovery Team can assist you by obtaining a Charging Order and they can be contacted at [email protected].

If you already have a Charging Order and would like to enforce it and obtain an order for sale, then contact our Dispute Resolution Team at Boyes Turner at [email protected].