What Is a Charge on a Property?

If you’re a property owner who’s in debt, you might face a charge on your home.

But, what is a charge on a property, when can a creditor apply for one, and can it prevent you from selling your house?

Let’s find out.

What Is a Legal Charge on a Property?

A legal charge on a property is a legal interest in a property that turns an unsecured loan into a secured one.

It is an agreement (which comes with a document called a ‘charge document’) where your home is used to secure a loan and allows the lender to get something in return if you fail to stop making repayments. 

For example, if you get a loan to buy a property and your loan provider puts a charge against it, it essentially means that your house is now collateral against that loan. If you can’t pay back what you owe, the lender will repossess the property and sell it to cover your debt.

Alternatively, the lender can also ask for proceeds from the sale of the property if you sell the house before you pay back your debt.

When a Creditor Can Apply for a Charging Order

Creditors can only apply for a charging order after they get a County Court Judgement (CCJ) against the debtor.

Whether putting a charge on a property your own is possible depends on when your creditor got the CCJ against you.

If your creditor got a CCJ before 1 October 2012, they could petition for a charging order only if you’ve:

• Missed a payment.
• Missed the deadline for paying off the debt.

If the CCJ was approved on or after 1 October 2012, they can apply for a charging order even if you’re up to date with your payments.

How Does a Creditor Get a Charging Order?

There are two steps to getting charges on property: getting an interim charging order and a final charging order.

Interim Charging Order

The first step to getting a charge on a property is obtaining an ‘interim order’. The creditor will need to inform the court that you fully or partially own property and prove that’s the case. 

When they apply for an interim order, they can register a charge on your property at the Land Registry, which will mean that you can’t sell the property without their knowledge. 

The important thing to note is that an interim order is made by a court officer and can be issued without a hearing. If a court officer grants your creditor an interim order, your creditor will be obliged to provide you with a copy of it within 21 days of its issue date. 

There might be a hearing if the court office believes that a judge should consider the application or if you haven’t missed your monthly repayments.

Final Charging Order

If you are served with an interim charging order, you have 28 days to object to prevent a ‘final charging order’. This must be done in writing to the court and the creditor.

If you object, the court will set a hearing date, where you can make your case in front of a judge.

If you have valid arguments and solid evidence, the judge can decide against a final charging order. A judge is unlikely to approve the charging order if you haven’t missed any payments or if there’s not much equity in your property.

If you don’t object to the interim order, the judge will issue a final charging order, which will solidify the status of your property as one with a legal charge on it.

Worth noting: In a case where the judge has made an interim charging order and set a hearing date right after it, you will only have 7 days to object to the interim order. 

How Long Does a Charge on the Property Last?

In the UK, a charge on your home will stay listed in the Land Register until you pay off your debt. You’ll then have to apply to remove it. 

The only exception is Scotland, where a charge over property automatically expires after 12 years.

How to Find Out if There Is a Charge on My House in the UK?

The only way to find out if there is a charge on your property or a place you want to buy is to check the Land Registry database.

You’ll need to enter the property’s address and postcode in the search bar on the website, which will bring up a list of all the charges (if there are any) against the property.

You can also contact your solicitor or conveyancer. They will be able to conduct a more thorough search and advise you on how to proceed.

How to Remove a Charge on a Property?

If you have a charge on your property, you may be able to remove it by making a ‘discharge application’ with the court that issued the charging order.

There are a few reasons why the court may grant your discharge application, including if:

• The debt has been fully repaid.
• You have declared bankruptcy.
• The value of the security interest has decreased significantly since the charging order was issued.
• The charging order was issued based on incorrect information.

What Is an Order for Sale?

An ‘order for sale’ forces the debtor to sell the property and use the process to repay their debt.

Your creditor can apply for an order for sale once the court grants them a final charging order.

The court won’t grant your creditor an order for sale if:

• You owe less than £1,000 (including court costs).
• Your debt is protected under the Consumer Credit Act.
• The CCJ against you was issued on or after 1 October 2012, you were asked to pay in instalments, and you haven’t missed your repayments.
• You own the property jointly, and the debt is in your name only.

If the court grants your creditor an order for sale, you’ll have 28 days to pay the debt or leave. If you don’t, the lender can apply for a ‘warrant of possession’ to force you to leave the property.

How Does a Charging Order Affect Joint Tenants?

The court cannot place a charging order on the property if it is jointly owned and the debt is only in your name. In that case, the court can only allow a charging order on your share of the property, also known as ‘interest’.

Tenants who don’t own the property but live in it can argue that they have a “beneficial interest” in it.

The court can either put restrictions on the charging order or decline the creditor’s application if:

• Kids, elderly, or disabled people live at the address.
• Tenants need to stay close to their work or school.
• They put down a deposit to buy the home.
• They have been making mortgage payments.

What Happens if You Pay Off a Charging Order?

If you pay off the amount you owe under the charging order, you can ask the court to discharge the order. You’ll usually have to pay court fees and any other charges that have been added to the debt. 

In most cases, creditors will inform the Land Registry that the debt has been paid so that the charging order can be removed from your property.

Bottom Line 

A legal charge against property is a document that transforms your unsecured loan into a secured one. 

The best thing you can do is pay what you owe to your creditor. You can argue against the charge in court, but if you’re unsuccessful, your creditor might move to get an order that forces you to sell the property.