How To Enforce A Charging Order Against A Debtor By An Order For A Sale? A Basic Guide
This is Part 2 of our guide on how to obtain a charge against property and enforce it through an order for a sale (please read Part 1 of this blog, where we outlined the main steps that ought to be taken by creditors seeking to enforce a debt in their favour through this legal route).
3. Obtaining an Order for a Sale
When and how to make the claim
Once you have secured a final charging order, the last procedural step to recoup the debt owed to you will be obtaining an order for a sale of the charged property. This blog post provides a simple guide on obtaining orders for a sale of properties that are owned solely by debtors (i.e. there are no co-owners).
Although you may apply for an order for a sale at any time after the final charging order is obtained, it’s pivotal to choose the time wisely. Prior to making an application you should carefully consider the current property market and if it is unfavourable, you may wish to wait until it improves and there is enough equity in the property to pay off any charges on the property that pre-date your charge. Interest continues to accrue on any charging order until actual payment, usually at a preferential rate of 8% per annum. Further, if the debtor is making payments in instalments to you and has not defaulted, it will not be possible to apply for an order for a sale.
If the charging order was made at County Court Money Claims Centre in Salford (CCMCC), the application for an order for a sale should be made at the debtor’s home court. In other cases, the application should be made at the same court at which the charging order was obtained. However, if the amount of debt is more than £350,000, then the application should be made to the High Court. To commence the procedure, you will need to complete a Part 8 Claim Form, attach a draft order and pay the appropriate court fee.
You must also file written evidence confirming details of the debt, the debtor, the property, any other creditors with charges over the property, anybody else who may have rights to the property or who is in possession of the property. If the charge concerns a residential property, you should also provide details of any persons who may have a claim to the property pursuant to family law rules. This information should be obtainable from the Land Registry.
As a part of your supporting evidence, you must provide an estimate for the price which can be reasonably obtained for the sale of the property. Such information may be obtained by carrying out an online search of property listings in the area and evidencing the search or by obtaining a quote from local estate agents. Some agents may charge a small fee for that information but, arguably, the court will be more likely to be persuaded by a price valuation provided by an independent professional.
Once the claim is issued, the court will make the appropriate directions, including setting up a hearing date. You will also have to comply with the service requirements on the debtor and other concerned parties.
At the hearing
At the hearing, the court will consider whether it is appropriate to make an order for a sale and take into consideration factors such as:
- the conduct of the debtor
- the prospect of satisfying the debt without the order
- the size of the debt and value of the property
- any related human rights points and
- whether the property is occupied and, in particular, whether any minors live in the property. Crucially, the fact that children reside in the property will in itself not determine whether an order is made but it will have to be counterbalanced by other factors, such as the debtor’s behaviour.
It is our recommendation to provide the court with clear evidence for the debtor’s conduct, including, if applicable, a history of your attempts to contact the debtor to settle the debt.
After the hearing
If the court rules in your favour, an order for a sale will be made and it will be the last opportunity for the debtor to satisfy the debt by a fixed deadline. If it is not done, the order will specify a date by which the possession of the property will have to be delivered for you and specify the arrangements for the transfer of property title. The order will specify how you will have to deal with the proceeds of sale and in what order.
Practical issues such as who has conduct of the sale will also need to be determined by the court.
Obtaining a charging order and an order for a sale against one’s property can be a lengthy and onerous process but it may be one of few effective ways of enforcing substantive debts against elusive debtors, especially given the rising value of properties. However, the process may not always be straightforward especially if third parties are involved and have interests in the property too.
There are strict requirements in the court rules (especially around service) so if large sums are at stake then you should consider getting appropriate legal advice early on before embarking on court proceedings.
Lastly, remember that each case will differ on its facts and the above guide must not be construed as legal advice.