Does adding a charge give immunity to future charging orders?

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    Does adding a charge give immunity to future charging orders?

    If I grant a charge on my freehold title to a trusted relative/friend, will this protect it from any later charging orders from people with a CCJ against me?

    I want to ensure this valuable freehold asset is safe, so I figured why not use a charge to defend against a potential future one?

    No money would actually change hands, my relative would just be the chargee until I want to sell and then they'd discharge at my request. Do I have to state a value on the charge for at least the market value so any later charging orders receive nothing from sale proceeds? I don't know how the process works tbh, it was just an idea that seemed plausible!

    #2
    If I grant a charge on my freehold title to a trusted relative/friend, will this protect it from any later charging orders from people with a CCJ against me?

    No.

    Comment


      #3
      I meant as in protect it from the teeth of a subsequent charging order as I know charging orders can still be added but I thought charges were ranked in order with priority?

      So can you elaborate please? How would a later charging order override an earlier charge when it comes to recovering monies? Otherwise what teeth would the order have to recover any money?

      ​​​​​​

      Comment


        #4
        Originally posted by Lawcruncher View Post
        If I grant a charge on my freehold title to a trusted relative/friend, will this protect it from any later charging orders from people with a CCJ against me?

        No.
        No, unless the trusted friend actually owns it. There might be circumstances (as we discussed in another thread) where the OP is simply the trustee and the friend is the actual owner (via a deed of trust). Under such circumstances there might be a charge to protect the actual ownership interests of the friend.

        But I would have thought it would have to be done in a fairly secure way so as not to leave scope for accusations that this is cobbled together at the last minute in retrospect (e.g long ago, via a solicitor and deed signed by independent witnesses, CGT/stamp duty etc was paid on the transfer).

        Comment


          #5
          You would have to use a trust and you would have to employ an expert, it can cost thousands in fees and taxes. Even then, despite what the sales guy tells you I suspect it would fail if it was clearly an effort to avoid a default you know was coming.

          Should it all go pop, you would be a long way from losing the property, properly arranged IVAs can be amazingly fogiving.

          Comment


            #6
            A simple (blind) deed of trust or deed of assignment will not cost much, but I agree that if it is to protect in these circumstances it will have to be pretty formal and not recent or to prevent the particular issue. There will not be taxes apart from those relating to the actual transfer (which can be substantial), but the trust itself would not be taxed.

            Comment


              #7
              Originally posted by Loque View Post
              I meant as in protect it from the teeth of a subsequent charging order as I know charging orders can still be added but I thought charges were ranked in order with priority?

              So can you elaborate please? How would a later charging order override an earlier charge when it comes to recovering monies? Otherwise what teeth would the order have to recover any money?​​​​​​
              Charges do indeed rank in priority according to when they are registered. If you have a first mortgage to a building society no subsequent charge of any kind can stop it being a first charge with priority over all subsequent charges. If there is a restriction preventing the registration of second mortgages, no second mortgage can be substantively registered, but notice of the mortgage can be entered on the register giving priority over any subsequent charge. However, as the mortgage is not substantively registered no power of sale attached to it can be exercised without the leave of the court. A charging order is not a mortgage, but once registered gives priority over any subsequent charges whether mortgages or not. No power of sale is attached to a charging order, but a court can make an order for sale if it thinks fit.

              In practice a charging gives a creditor security to ensure (subject to there being sufficient equity) that on a sale he gets his money. On sale by a prior chargee funds get passed down the line with the last chargee paying any balance to the property owner.

              Setting up a trust of which you are the beneficiary does not protect your assets as a creditor can get a charging order on an equitable interest and protect it by giving notice to the trustees. Further, in bankruptcy proceedings trusts can be unravelled.

              Comment


                #8
                Thanks for all the replies. I think assignments or trusts are a no-no because I need to be the legal owner to bring the claim. I don't have any CCJ's yet but may soon have to bring a judicial review against my local council over details I better not divulge on an open forum. As costs follow the result I could be faced with ££££'s of their legal costs if unsuccessful.


                Originally posted by Lawcruncher View Post
                In practice a charging gives a creditor security to ensure (subject to there being sufficient equity) that on a sale he gets his money. On sale by a prior chargee funds get passed down the line with the last chargee paying any balance to the property owner.
                It looks like you are saying I can grant the first charge for an amount equal or greater than my freehold value to a trusted person, then their will be no leftover proceeds to pay the second chargee.

                Then when I want to sell it, the first chargee notifies the LR to remove the charge by stating they have received all proceeds. Or would I need them to force my bankruptcy/sale and/or actually repossess the title instead? Either way it's preferable to the second chargee (council) recovering their legal costs if it goes that way.

                Replies are saying it won't work but Lawcruncher's quote above I interpret to mean if no balance is left over for lesser priority chargees then it will work?

                Comment


                  #9
                  There are two possible scenarios.

                  One is that you sell the property. On a sale by the owner all the charges have to be paid off or the buyer will not complete.

                  The other is that the property is sold by a chargee. If it is a first chargee he takes what he is owed and then has to send the balance to the next chargee in line. If the first chargee is your friend you do not in fact owe him anything so he will have to send all the proceeds of sale to the next chargee in line. If your friend points to the mortgage saying you owe the amount specified in it when you do not it will be fraud and both you and your friend will become guests of Her Majesty.

                  In fact the whole idea is sailing close to the wind and I cannot recommend it. Apart from being potentially fraudulent, it is a very bad idea. You need to bear in mind that if you sign a deed which says you have received x pounds you cannot deny that you did not receive it. That is because you cannot deny the truth of a statement you make in a deed. So, if your friend proves to be untrustworthy or dies, he or his personal representatives can sue for the x pounds and if you cannot show that you have paid it you will have no defence.

                  Comment


                    #10
                    Thanks for the reply. Sorry for the late update.

                    Both of your possible scenarios involve selling the property. However can a secondary ranked chargee get an order to force sale without the first chargee's agreement? And even then wouldn't the result of this simply mean the property becomes repossessed by the first chargee and there is no duty for him to sell it to realise monies PROVIDED THAT the value of the property is not enough to fully satisfy the first charge, let alone the secondary charge. So the secondary charge is useless.

                    Regarding the "fraud" bit, why do I have to have received any money directly at that time to grant a charge for £x amount? My argument would be that I wanted to give something back to my friend/relative for everything they've for done for me over the years, I decided I owed them a debt so wished to grant them this charge.

                    Plus there's also the deterrent aspect, I.e why bother to become a secondary chargee over an asset that is worth less than the what is required to satisfy the existing charge?

                    Comment


                      #11
                      Courts order sales all the time without the agreement of any trustee or chargee, let alone the first second or third ordered.

                      You are just talking about one particular mechanism for trying to hide assets prior to a court judgment. The attempt to do that is fraud. Whether it was a legitimate payment for something, will be decided in court but in this instance I wouldn't hold out much hope. The fact that they could discharge their "gift" at your request (your OP) does not leave any doubt.

                      You could be fined or imprisoned – and will face hefty additional costs especially if the other party have to pay for specialist help to track down your missing money.

                      Comment


                        #12
                        Originally posted by Loque View Post
                        Both of your possible scenarios involve selling the property. However can a secondary ranked chargee get an order to force sale without the first chargee's agreement? And even then wouldn't the result of this simply mean the property becomes repossessed by the first chargee and there is no duty for him to sell it to realise monies PROVIDED THAT the value of the property is not enough to fully satisfy the first charge, let alone the secondary charge. So the secondary charge is useless.
                        If a lender or creditor wants to enforce a financial charge on land he first has to ask if he has a power of sale. A mortgage made by deed has a power of sale attached to it whether it is a first, second or subsequent charge. So long as he complies with the statutory requirements, any lender can exercise that power of sale. When a second or subsequent lender sells under his power of sale he must before taking what he is owed pay off the first or any prior lenders in full. That means that if the proceeds of sale are insufficient to pay off the first and any other prior mortgages a second or subsequent lender he cannot sell.

                        A charging order is not made by deed and has no power of sale attached to it. Before he can sell the creditor must get the court to grant him a power of sale. Once he has the power he is in the same position as a lender with a mortgage made by deed.

                        Originally posted by Loque View Post
                        Regarding the "fraud" bit, why do I have to have received any money directly at that time to grant a charge for £x amount? My argument would be that I wanted to give something back to my friend/relative for everything they've for done for me over the years, I decided I owed them a debt so wished to grant them this charge
                        It is perfectly possible to execute a charge which provides security for future borrowings whether unlimited or up to a specified sum. However, the position is not quite straightforward and it is explained here: https://gateleyplc.com/insight/quick...er-s-security/

                        What is straightforward though is that, whatever the mortgage provides, if a lender represents that he is owed more than he actually is owed with a view to keeping a subsequent chargee out of his money it clearly is fraud.

                        Originally posted by Loque View Post
                        Plus there's also the deterrent aspect, I.e why bother to become a secondary chargee over an asset that is worth less than the what is required to satisfy the existing charge?
                        Before lending, a second or subsequent lender will want to know how much is owing on any existing mortgages and establish if any cover further advances. A creditor seeking a charging order is in a different position. He simply takes the view that a charging order is better than nothing. It may prove to be worthless and if it does he is not in any worse position than he was before securing the charging order, other than being down the cost of getting the order. One thing is certain though and that is that an owner cannot sell his property if he cannot pay off all the financial charges on it.

                        Comment


                          #13
                          Thanks for replies. So it seems perfectly possible to use the method! Provided the first priority charge exceeds the value of the property it's against then any later charges are worthless. While I wouldnt be able to sell, I could simply ask the first chargee to repossess and then all other charges would disappear because the property is in negative equity at time of repossession to the new chargee owner, as such any secondary chargees cant force the sale indirectly because all monies would be given to first chargee.

                          So the remaining issue is about the link you posted. Interesting although that relates to future additional lending. For me the argument is that I have granted this charge to the first chargee to acknowledge a previous past debt I feel I owe for all the kindness and benefit in kind given to me by this person over the previous years. Now before you mock the veracity or laugh at that suggestion... in law do I have to justify my prerogative? If so, I could say that I lived rent free for 10 years, had meals cooked, etc by the chargee and now I decided to grant a charge in their favour. If the chargee was a certain close relative or parent this would be true.

                          Nobody has pointed to anything in law that states actual hard cash must be transferred to the chargor for the value of the charge?

                          AndrewDod What is fraud here? I would create the charge before court proceedings even begin, never mind by the time judgement is nearing!


                          Comment


                            #14
                            Originally posted by Loque View Post
                            What is fraud here? I would create the charge before court proceedings even begin, never mind by the time judgement is nearing!
                            Giving your money to a third party in anticipation of court proceedings in order to hide your money to avoid the potential consequences of a detrimental judgement (divorce settlement or whatever) -- is fraud.

                            You admit that is your reason. All you are talking about is a very convoluted particular method for doing that.

                            Comment


                              #15
                              Originally posted by Loque View Post
                              Thanks for replies. So it seems perfectly possible to use the method! Provided the first priority charge exceeds the value of the property it's against then any later charges are worthless. While I wouldnt be able to sell, I could simply ask the first chargee to repossess and then all other charges would disappear because the property is in negative equity at time of repossession to the new chargee owner, as such any secondary chargees cant force the sale indirectly because all monies would be given to first chargee.
                              The later charges would indeed be worthless as security, but the debts they secure will not be cancelled.

                              Originally posted by Loque View Post
                              So the remaining issue is about the link you posted. Interesting although that relates to future additional lending. For me the argument is that I have granted this charge to the first chargee to acknowledge a previous past debt I feel I owe for all the kindness and benefit in kind given to me by this person over the previous years. Now before you mock the veracity or laugh at that suggestion... in law do I have to justify my prerogative? If so, I could say that I lived rent free for 10 years, had meals cooked, etc by the chargee and now I decided to grant a charge in their favour. If the chargee was a certain close relative or parent this would be true.

                              Nobody has pointed to anything in law that states actual hard cash must be transferred to the chargor for the value of the charge?
                              A mortgage is a deed and any statement you make in a deed cannot later be denied. So, if in a mortgage to X you say are indebted to X in the sum of Y pounds X can rely on the statement. The main point here is of course that, even if X is totally trustworthy*, you are not going to grant such a mortgage to X without him being in on why you are doing it, which will make him complicit if at a later stage your creditors are defrauded. And I do not think there can be any doubt that there will be a fraud if on a sale X picks up Y pounds and then gives it to you.Even if you get away wth it the sum is potenatially taxable as a gift. And what if after you grant the mortgage Y has some creditors after him? The mortgage will be one of his assets.

                              All in all your scheme is a bad idea.

                              *It has to be doubted that anyone willing to engage in a potential fraud is totally trustworthy

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