Charging order: securing a debt against property

A charging order is a way to secure a CCJ (County Court Judgment) against the debtor's property. Once registered, when they sell or remortgage, your debt gets paid from the proceeds. It's particularly useful when someone owns property but claims they can't pay.

How does it work?

A charging order works like a second mortgage:

1. You apply to the court after getting a CCJ
2. The court grants an interim order (temporary charge)
3. A hearing confirms the final order (permanent charge)
4. The charge is registered with the Land Registry
5. When the property is sold, you get paid from the proceeds

The debtor can still live in and use the property. But they can't sell or remortgage without dealing with your debt.

For larger debts, the creditor can apply to the Court to have the property sold.

When to use a charging order

Ideal situations:

• The debtor owns property (house, flat, land)
• They claim they can't afford to pay
• Bailiffs/enforcement haven't worked
• You're willing to wait for payment

Not suitable when:

• The debtor doesn't own property
• The property has no equity (mortgage is more than value)
• You need money quickly
• The debt is very small (costs may not be worth it and/or the Court may not order sale)

How to apply

Step 1: Apply for interim order

Use form N379 (Application for a charging order).

You'll need:

• CCJ details (case number, date, amount)
• Debtor's property address
• HM Land Registry title number of the property to be charged (you can search for this)
• Evidence of ownership (normally for registered land you can get this from HM Land Registry)

Cost: Court cost of £135 (added to the debt)

Step 2: Court grants interim order

If your application is valid, the Court grants an interim charging order. This:

• Takes effect immediately
• Is registered with the Land Registry
• Remains until the final hearing

Step 3: Final hearing

A hearing is scheduled (usually 4-8 weeks later). At the hearing:

• Both parties can attend
• The court considers any objections
• The court decides whether to make the order final

Common objections:

• "It would cause exceptional hardship"
• "The property has no equity"
• "There are other people living here"

Courts usually grant final orders unless there's a strong reason not to.

Step 4: Order registered

Once final, the charging order is registered at the Land Registry. Anyone searching the title will see it.

What happens when they sell?

When the debtor sells or remortgages:

1. The solicitor searches the Land Registry
2. They see your charging order
3. Your debt must be paid from the sale proceeds
4. You receive payment before the debtor gets their equity

If the property is sold for less than all the debts secured on it (mortgage + charging orders), you may not receive the full amount.

Can you force a sale?

Yes, potentially. After getting a charging order, you can apply for an order for sale to force the property to be sold.

However:

• Courts are reluctant to make people homeless
• Usually only granted for large debts
• Must show the debtor can't pay any other way
• Takes time and costs more money

In practice, the pressure of having a charge often prompts payment or negotiation.

Priority of charges

If there are multiple charges on a property, they're usually paid in date order:

1. First mortgage (almost always comes first)
2. Other secured lenders
3. Charging orders (in the order they were registered)
4. The owner (gets whatever is left)

If there's not enough equity to pay everyone, later charges may get nothing.

Costs

All costs are added to the debt, so the debtor pays if there's enough equity.

How long does it take?

Pros and cons

Advantages:

• Secures your debt against a real asset
• Works when other enforcement fails
• Debtor can't easily escape
• Motivates them to pay to clear the charge

Disadvantages:

• You only get paid when they sell
• Could wait years
• Property might have no equity
• Costs may not be worth it for small debts

Checking if there's equity

Before applying, check if the property has equity:

1. Estimate the value (Zoopla, Rightmove, estate agent)
2. Check Land Registry for existing charges (£3 per title)
3. Calculate: Value minus mortgage minus other charges = equity

If there's no equity, a charging order is pointless.