Enforcement action: county court proceedings: charging orders: charging orders - introduction
What a charging order is
A charging order is an order of the court charging a judgment debtor’s assets with payment of a judgment debt. The order prevents the judgment debtor from selling the charged assets without first paying the judgment debt.
Assets that can be charged
The most common asset to be subjected to a charging order will be land or property in the UK, however, charging orders can also be placed on funds in court and on other assets, for instance financial products such as
- stocks and shares
- government stock
- unit trusts
- investment trusts
- PEPs and ISAs (both mini and maxi share ISAs).
Charging orders placed on financial products will be enforced by sale and not merely used to secure the debt.
You can enforce by third party debt order against a cash ISA (DMBM667120).
Jointly owned property
It is not possible to register a charging order as an ‘equitable charge’ on a jointly owned property unless all the owners / registered proprietors are judgment debtors. Where only one of the owners / registered proprietors is the judgment debtor, the order will be registered as a ‘restriction’.
Agreed notices or restrictions
Since the Land Registry Rules 2003 took effect in October 2003, a charging order is registered as either an ‘agreed notice’ (shown on the register as an ‘equitable charge’) or a ‘restriction’. Prior to October 2003 where only one of the owners / registered proprietors was the judgment debtor, the order was registered as a ‘caution’. A caution served much the same purpose as a restriction. Any cautions registered before October 2003 will remain on the register.
A notice or restriction does not impose an obligation to make payment when the property is sold. However if the judgment debtor (or any one of the co-proprietors) attempts to dispose of the property, the District Land Registry will advise the claimant of the interest in the property. Prospective purchasers will be wary of buying a property subject to a notice or restriction and, more often than not, will want the notice or restriction removed before completing the sale. This is normally sufficient incentive for the judgment debtor to pay the judgment debt. Even where they do not do so voluntarily, the fact that they have received money and have failed to pay the judgment debt is valuable evidence in support of a request for a judgment summons.
Do not agree to have the notice or restriction removed until the judgment debt has been paid.
Use of charging order in the longer term
A charging order on property protects a debt in the longer term. It rarely secures early payment unless the property is sold or remortgaged in the immediate future.
Do not discount a charging order because of the lack of, or even negative, equity in the property when you consider the matter, because the equity position will usually improve with time.
Because accruing interest cannot be included in the county court judgment, you must always recalculate the interest position when the property is eventually sold.
If your claim has been made through the CCBC, you need to transfer the case to the local court before taking this method of enforcement (DMBM665790).
For limited company cases the local court is the claimant’s home court, in all other cases it is the defendant’s.