Orders for sale: FAQ’s

Orders for sale: FAQ’s

17th February 2013

1. What is an order for sale?

An Order for sale is a way to enforce a Charging Order. It is an order granting the chargeholder the right to take possession of the property and then to sell it in order to recover the monies secured by their charge. Order for sale proceedings are governed by Part 73.10 of the CPR.

 

2. Can an order for sale be obtained without first obtaining a charging order, to enforce an unsecured debt, for example?

If the creditor has no interest in the property, and is not a trustee of the property and then the court will not make an order for sale without a charging order being obtained first.

Therefore, if a creditor wishes for a property to be sold, it should first obtain judgment, followed by a charging order securing the debt.

 

3. Is the property being occupied by tenants a bar to obtaining the order for sale?

This is not a bar to obtaining the order for sale. However, pursuant to CPR 73.10, the Court has an unfettered discretion as to whether or not to make an order for sale; the Court will bear in mind the presence of tenants, or any other party, when exercising its discretion.

 

4. Can the Court make an order for sale over a property owned by the debtor jointly with a third party?

Yes. The preceding charging order will be made only over the share of the property that belongs to the judgment debtor. The fact that the property is jointly owned will not prevent the court from making an order for sale of the property. Again, the court must exercise its discretion; it will no doubt balance the impact on the creditor of being prevented from enforcing the charging order and the impact on the joint owner of being forced to sell their interest in the property.

Please note that the debt charged will only be recoverable from the share of the proceeds following sale that belong to the judgment debtor. If, for example, a property that is owned by two people equally is sold to enforce a charge of £30,000, and where the proceeds of sale, following the discharge of any charges with priority (most commonly a mortgage) are only £40,000, the creditor will only be able to recover £20,000, the share owned by the judgment debtor.

 

5. Are the costs of obtaining an order for sale fixed costs, like those of obtaining a charging order?

No. The costs should be assessed by the court at the end of the application. You should therefore prepare a schedule of costs for the application for the order for sale and file and serve this on the other parties in advance of the hearing; the costs will be payable out of the proceeds of the sale of the property.

 

6. What factors will the Court consider in deciding whether or not to make an order for sale?

The Court has an unfettered discretion, but the most relevant factors, apart from those considered above, are likely to be;

(i) Size of debt

(ii) Likelihood of the debt being satisfied by the proceeds of sale. A valuation of the property and redemption statements for an charges with priority will therefore necessary.

(iii) Whether the creditor is unlikely to be able to recover his debt using an alternative method.

 

7. How do I apply for an order for sale?

A judgment creditor can apply for an order for sale at any time. There are no limitation problems because enforcement of a charging order by seeking an order for sale is not an action on a judgment but a fresh step taken by the judgment creditor. Statute does however limit the arrears of interest that can be secured by a charging order to the last six years’ interest. That being said, interest will continue to accrue on the sum secured by the charge, until the principal debt is repaid.

An application for an order for sale requires proceedings under Part 8 of the CPR.. It should be made in the court that made the charging order unless the court lacks jurisdiction to make an order for sale. If the amount owed exceeds the County Court Limit, the application should be made in the High Court (the High Court can order the transfer of the proceedings to an appropriate county court).

A copy of the charging order must be filed at court with the claim form. The application must also be supported by written evidence (in the form of a witness statement or included in the claim form verified by a statement of truth and supporting documents).

Pursuant to CPR PD 73.4.3, the evidence must;

  • (i) Identify the charging order and the property.
  • (ii) State the amount in respect of which the charge was imposed and the amount due as at the date of issue of the claim.
  • (iii) Verify the debtor’s title to the property charged, for example, by use of office copy entries of the land registry.
  • (iv) State, so far as possible, the names and addresses of any other creditors who have a prior charge or other security over the property and the amount owed to each.
  • (v) An estimate of the price which would be obtained on sale of the property, by way of a valuation.
  • (vi) If a claim relates to land, give details of every person who to the best of the claimant’s knowledge is in possession of the property.
  • (vii) If the claim relates to residential property, state whether:
  • o a land charge of Class F, or
  • o a notice under section 31(10) of the Family Law Act 1996, or under any provision of an Act which preceded that section,

 

has been registered and if so, state on whose behalf the land charge or notice has been registered and that the claimant will serve notice of the claim on that person.

There is a fee for issuing a CPR 8 claim; this will be higher if the claim needs to be issued in the High Court.

After the claim form and evidence is issued, the court may give directions, which may include fixing a date for the hearing of the application where the court will exercise its discretion whether or not to make an order sought.

The judgment creditor should send the claim form and other documents to the judgment debtor and any other interested party.

 

8. What happens to a charging order if the order for sale application fails?

Nothing. The charge remains and interest will continue to accrue. Depending upon the reason for the failure of the application, the costs of the application may be added to the charge, or be ordered to be paid by either party; they are in the discretion of the Court.

This Guide is for general information only and is not legal advice. Professional advice should be taken before taking action. No liability can be accepted for any action taken or not taken as a result of this information. Please see our Terms and Conditions