What is a Charging Order?
A charging order is a method of enforcing a judgment or an order obtained in the County Court or High Court. It operates in a similar manner to a mortgage and is, therefore, used where a judgment debtor (the person, business or organisation, who owes the money) owns a property. A charging order can, and should be, registered at the Land Registry. When the judgment debtor comes to sell the property the monies owed under the judgment are paid to the judgment creditor (the person who is owed the money) plus interest from the date of the charging order, assuming of course that there is sufficient equity in the property to enable payment to be made.
What are the advantages of a Charging Order?
The main advantage of a charging order is that if there is sufficient equity in the property the judgment creditor can be reassured by the fact that they will be paid when the property is sold. Another advantage is that interest will continue to accrue on the judgment sum until the property is sold.
It may be that at the time of the judgment there is insufficient equity in the property and the judgment debtor may not have sufficient funds to discharge the judgment. However, if in the period between the charging order being made and the sale of the property there has been a rise in property prices it may well be that there is sufficient equity in the property by the time the judgment debtor comes to sell it.
What are the disadvantages of a Charging Order?
A charging order does not give a judgment creditor the right to sell the property. Since the judgment creditor will generally not be paid the judgment sum until the property is sold the judgment creditor may have to wait for many years before they receive payment. For this reason charging orders are generally only applied for if a large sum of money is owed and the judgment debtor does not have any high value assets other than a property.
How to apply for a Charging Order
An application for a charging order is a 2 stage process. The first stage involves the making of an interim charging order and the second stage involves the making of a final charging order.
The first stage is essentially a paper exercise and is normally done without giving any notice to the judgment debtor. This stage involves the judgment creditor applying to the court for a charging order by completing form N379, which can be obtained from the court office or found on the Court Service’s website.
The application should contain the following information:
The name and address of the judgment debtor;
Details of the judgment or order which the judgment creditor wishes to enforce (it is good practice to exhibit a copy of the judgment or order to the application);
The amount of money owed to the judgment creditor under the judgment or order at the date of the application;
If the judgment debt is payable by instalments, the amount of any instalments which the judgment debtor has not paid;
- Details of the judgment debtor’s interest in the property (“office copies” for the property in question will confirm the name of the owner of the property.
Identification of the property against which the charging order is sought (office copies can be used to provide the necessary identification);
The names and addresses of any other creditors of the judgment, if known (the office copies will confirm the names and addresses of mortgage lenders, creditors who have secured loans against the property and any other person who has a charging order against the property);
The names and addresses of the persons who need to be served with the interim charging order which will include the judgment debtor and any known creditors.
For more information on:
- Registering an Interim Charging Order
- Obtaining a final Charging Order
- Objecting to an interim Charging Order
- The hearing
- Steps which must be taken after the hearing
- Discharge or variation of a Charging Order