Can I Sell My House with a Charging Order?

If you’re a home seller with a charging order tied to your property, you may feel stuck and unsure about your options.

In this post, the team at Property Solvers run through what to do if you simply want to sell your home, settle the judgment debt and move on with your life.

We also go into whether creditors can force you to sell your house, how being in negative equity can affect things and what an “order for sale” is.  We’ll also explore removing and dealing with charging orders during the sale process.

First, let’s start with the basics…

What is a Charging Order?

A charging order occurs when a creditor formally seeks repayment of debt through the courts. They will seek to secure a legal “charge” against your home.

The creditor can only apply for a charging order after obtaining a County Court Judgment (CCJ) or a Magistrates Court has issued a judgment for an unpaid Council Tax liability.

The charge is equal to what the debtor owes (plus legal fees, court costs and statutory interest). There is a legal requirement to pay back what’s owed. It must also be registered with HM Land Registry to be effective.

The debt is then treated as a priority. When the debtor sells the property, the creditor has the right to claim all outstanding debts from the proceeds of sale.

Can I Sell My House When I Have a Charging Order?

Provided there is sufficient equity to cover the debts – yes, you can certainly sell your house. However, much will depend on how far things have got…

Understanding the Consumer Credit Act and Charging Orders

The Consumer Credit Act (1974) regulates borrower-lender agreements, including charging orders. This law protects consumers by requiring creditors to follow legal procedures before securing debt against property.

The Consumer Credit Act does not prevent a creditor from obtaining a charging order.  However, it does include procedural safeguards that may affect the process.

For example, before requesting a charge order, a creditor must have a County Court Judgement (CCJ) against the debtor. Debtors can also challenge unfair lending practices, request time orders to restructure repayments and protest exorbitant charges.

Can a Charging Order Force You to Sell Your Home?

Having a charging order secured against your home does not always mean you have to sell right away. Nonetheless, creditors may choose to pursue additional legal action to recoup their debt.  This is especially the case where debtors “bury their heads in the sand”.

However, the district judge is likely to be on your side unless there’s convincing evidence that there are no other ways to pay off the debt.

The creditor may not always have the authority to force a sale just because they have a charging order. Such a decision will need to go through the courts that will take into account several considerations, such as:

• The amount owed?
• How long the debt has been owed?
• What repayment efforts have been made (i.e. how proactive the debtor is)?
• Who lives in the property? If the home is occupied by dependents, the disabled, elderly or vulnerable people, the court may deny the application
• Is there enough equity in the property to cover the debt?

In most cases, to minimise further legal costs and delays, creditors would rather wait until the property is sold willingly rather than enforce a sale.

If you do decide to sell voluntarily, the creditor will be legally entitled to the debt (and associated legal fees) from the proceeds of sale before you receive whatever equity remains.

Can You Object To a Charging Order?

Yes, debtors can object to a charging order by writing to both the court and the creditor within 28 days of the date of service on the interim charging order.

What if I Am in Negative Equity?

Negative equity occurs when the total amount of debt you have secured against the property is above its sales value.

If you have owned the property for a long time, as long as you have not refinanced or taken out a separate secured loan, this should not be an issue.

However, if the total debts are too high, it would be a case of approaching the creditor to see what can be worked out to remove the charging order. Your options can include:

• A repayment schedule based on what you can afford
• Agreeing a monthly payment based on when you (and/or other joint owners) receive your salary
• Discussing Individual Voluntary Arrangement (IVA) to reduce the debts (note that this will impact your credit rating)
• Other ways to get the charging order removed – like releasing equity from a different property or borrowing from family

Here, it’s important to remember that communication with your creditor is crucial. Most will want to come to a mutually agreeable solution (based on your budget).  Indeed, it makes little sense to pursue further legal action to claim money that essentially doesn’t exist.

Order for Sale of Property

A creditor must ask the court for an order for sale if they choose to file for a charging order and then try to enforce it.

The court will use the following criteria to determine whether to issue an order for sale:

• Whether the amount owed warrants an order for sale
• If other forms of paying back the debt and all the circumstances have been considered
• If the court officer thinks the debtor has disregarded earlier attempts to resolve the issue.

Once the court grants a final charging order, creditors can request a hearing to argue that the homeowner should be forced to sell their home.

How to Get a Charging Order Removed Before Selling Your House

Whilst most buyers will not be put off (as long as there is sufficient equity), it’s entirely possible to get a charging order removed to avoid unnecessary delays when selling your property. There are a few options here:

• Pay off the entire amount owed if you can find the money from somewhere. You can then request a court order to have the restriction removed from the property records once the matter has been resolved.
• Request that the court revoke the order if you can prove that there are legal flaws. However, this only works in certain situations and you may need to instruct a litigation solicitor to assist.
• Ask for an order modification if you can agree with the creditor to some kind of repayment plan. This may make you eligible for a less restrictive order, facilitating a quicker sale of your home.
• Discuss a smaller lump sum payment that the creditor may accept if it means receiving payment sooner.

Once the charging order is a court-registered debt, it does not disappear automatically, even if you make regular payments. If you intend to sell your property and use the proceeds to clear the balance, you may still need to negotiate with both the court and the creditor.

Settling the Charging Order During The House Sale Transaction

Many homeowners in your situation choose to pay off the charging order debt after agreeing on a price with a buyer and moving forward with the conveyancing. The solicitor selling your property will need to make sure the creditor gets the money they are due directly from the proceeds of sale.

To help facilitate the process, it’s important to:

• Ensure that there is sufficient equity to pay off the creditor alongside the mortgage and other secured debts. Your lender(s) can forward a statement which will include any Early Redemption Charges (ERCs) and other fees upon exiting the mortgage (and other loans)
• Speak with the creditor as the conveyancing process is underway
• Keep the creditor aware of the intention to clear debts and remove the charging order
• To avoid unnecessary delays, make sure all the documentation is in order. Your solicitor can help you with this.

How the Process of Selling a House with a Charging Order Works

Once you have a buyer, the sale process should move forward without any major hurdles.

Nonetheless, there may be delays while legal issues are being settled if an order final or charging order application is still pending. A good conveyancing solicitor will be able to help you navigate through the process, protect your interests and ensure a timely sale.

Most buyers will not be concerned about the fact that there is a charging order. However, be careful as they may see you as “motivated” and potentially look to renegotiate the price – especially if they feel you need to secure the sale within a set timeframe.

It’s therefore worth keeping the details as discreet as possible.  Your solicitor should only disclose information regarding the property itself. Indeed, there is no need for the buyer to know about your personal financial circumstances.

Final Thoughts on Selling a House with an Interim or Final Charging Order

Whilst not without its challenges, selling a house with a charging order is entirely possible.

How you proceed depends on your circumstances. For instance, whether you have enough equity in your property to cover the debt or need to negotiate with creditors are crucial factors. If you have received an order for sale, it’s important to have an open dialogue with the lender to see what you can do to stop things from getting worse.

Regardless of your situation, with statutory interest increasing on top of the debt you owe, we would highly suggest dealing with the matter as quickly as you can.

With well over 20 years of experience, Property Solvers would certainly be able to assist if you’re exploring fast sale options. We offer both 7-day cash sale and auction services.