Selling a house with a charging order

How is a charging order paid when you sell?

Citizens Advice says that if you sell a property with a final charging order, you must pay your creditor back out of the proceeds. In practice, your solicitor will usually get a settlement figure from the creditor and pay it from the proceeds at completion, along with your mortgage and anything else secured on the home.

In England and Wales, the Law Society’s Property Information Form (TA6) asks directly whether the sale price will be enough to pay off all mortgages and charges secured on the property. Work this out early. If the proceeds won’t cover everything, speak to a debt adviser before you agree a sale, not after.

Our guide to selling with a mortgage explains how redemption works on completion.

How does a charging order show on your title?

HM Land Registry’s Practice Guide 76 explains that the entry depends on how you own the home:

• Sole owner. The charging order charges the legal estate and is usually protected by a notice on the register.
• Joint owners. Joint owners hold the legal estate as trustees, so an order against one owner charges their beneficial interest. That can’t be protected by a notice, so the creditor applies for a Form K restriction.

Neither stops a sale from going ahead. Land Registry says it will automatically cancel a Form K restriction once it has been complied with, on registering a sale for value to someone other than the existing owners. A notice can be removed on an application supported by evidence such as a receipt for payment or a court order discharging the charging order.

Can a creditor force you to sell?

A final charging order doesn’t mean you have to sell. Citizens Advice explains that if a creditor wants to force a sale, it has to apply to the court for a separate order for sale. The court considers matters such as whether there is enough equity to cover the mortgage and the charging order debt, the welfare of any children, other ways of repaying, and hardship to your family.

There is also a threshold. Under the Charging Orders (Orders for Sale: Financial Thresholds) Regulations 2013, where the debt arises under a regulated consumer credit agreement, no order for sale can be made to recover an amount of less than £1,000.

What about Scotland and Northern Ireland?

Scotland doesn’t use charging orders. Instead, a creditor can register an inhibition. Accountant in Bankruptcy says this prevents you disposing of your home or other property, and mygov.scot says it stops you selling your home. If you are in Scotland, speak to a free adviser and a solicitor before you put the house on the market.

Northern Ireland has its own system. The Enforcement of Judgments Office can make orders charging land, which nidirect says mean any profit from selling the property goes to pay off the debt before you receive any money.

If selling is the right decision

Once you have had free advice, you may decide that selling is the right way forward, perhaps because the charging order sits alongside other debts or because you want a fresh start. If a creditor is already pressing for possession, read our guide to facing repossession too.

Be realistic about price. A quick sale to a cash buyer usually means accepting less than full market value in return for speed and certainty, and a lower price leaves less to clear the charging order and your other debts. An estate agent may achieve more if you have time, so compare both. Our guide to how much cash buyers pay explains how offers are worked out.

If a quick sale still feels right, some of the vetted cash buyers on our panel buy homes with problems like this, including charging orders and other debts secured on the title. You can get offers for my home and, with your consent, we pass your details to them. We don’t buy or value homes ourselves, our service is free, and you are under no obligation to accept any offer.