HOW IS A CHARGING ORDER CREATED?

The actual mechanics of creation of a charge are simple. The

Judgement creditor first obtains Judgement and then tries to get the Judgement debtor to “voluntarily” satisfy the Judgement. If the Judgement debtor fails to voluntarily satisfy the Judgement, a Judgement charge can be created against the Judgement debtor’s property. 

In order to create a charge over real property (i.e. land and buildings) belonging to the Judgement debtor, it is first necessary to be certain that the Judgement debtors owns that property. Typically a Land Registry Search will reveal whether or not the Judgement debtor owns the property. Alternatively a Judgement creditor can compel if the Court is so willing, the Judgement debtor to be made the subject of an “oral examination” by the Court. This will compel the debtor to disclose his or her assets to the Court. The penalties for hiding assets in those circumstances are quite severe.

An Application is made to Court with an Affidavit by the Judgement creditor requesting that the Court make a Charging Order Nisi. This then goes before the District Judge ex-parte (i.e. without notice to the debtor) who will usually grant the Charging Order Nisi. The Charging Order Nisi is then registered at HM Land Registry. The parties who then deal in the property, deal in that property with full knowledge and subject to the Charge.

A date is then set for a Hearing for a Charging Order Absolute. The debtor will be allowed to attend and make representation as will the creditor. If a Charging Order Absolute is granted then the Charging Order becomes effected. Application can subsequently be made for an Order for sale. These are not always made by the Courts who tend to favour the debtor especially if the amount owed is relatively small

In most instances, any property of the Judgement debtor, which is transferred without satisfaction of the Judgement, is transferred subject to the charge. This means that if the charge is not satisfied prior to the transfer being made, the property remains subject to the charge in the hands of the transferee.