What is a Charging Order?

A Charging Order is a court order that can be obtained by a creditor who has obtained a judgment, such as a County Court Judgment (CCJ) against a debtor. Charging Orders are obtained under the Charging Orders Act 1979. This type of order allows the creditor to secure their debt against a property owned by the debtor by placing a charge on the same. The charging order can be either an interim charging order or a final charging order.

An interim charging order is a temporary measure that is granted by a Court Officer pending a final hearing. It allows the creditor to secure their debt against the property until the final hearing, where the judge will decide whether to make the interim charging order final. If the interim order is made final, it will replace the interim charging order, and the creditor’s debt will be secured against the property.

A final charging order is a permanent measure that is made after an interim charging order has been granted and a final hearing has taken place. It allows the creditor to secure their debt against the property until the debt is repaid.

Once a charging order is made, the creditor becomes a secured creditor, which means that they have a priority claim on the proceeds of the sale of the property, ahead of unsecured creditors. If the property is sold, the proceeds will first be used to pay off any outstanding mortgage on the property, followed by the secured creditors, and then the unsecured creditors.

A creditor may wish to apply for an Order for Sale following a successful Charging Order Application. An Order for Sale will force the property owner to sell the property so that the charging order debt can be paid.

It’s worth noting that if the debtor is the joint owner of the property, the charging order may only apply to the debtor’s share or interest in the property. Additionally, a final charging order does not guarantee that the creditor will be repaid, as the debtor may still have other debts and financial obligations that they need to meet.

Debtors can have a Charging Order discharged by paying off the debt owed and including evidence of payment to the Court within their application for a Certificate of Satisfaction.

How to Apply for a Charging Order

To apply for a charging order, you must follow these steps:

• Obtain a judgment against the debtor: Before you can apply for a charging order, you must have obtained a judgment against the debtor. This means that the court has made a decision that the debtor owes you money, and has ordered them to pay the debt.
• Apply for an interim charging order: The next step is to apply for an interim charging order. This is a temporary measure that will allow you to secure the debt against the debtor’s property until the final hearing. To apply for an interim charging order, you must complete a form N379 (Application for an interim charging order), and submit it to the court. You must also pay a fee.
• Serve the interim charging order on the debtor: Once the court has granted the interim charging order, you must serve it on the debtor. This means that you must send them a copy of the order, along with a notice that explains what the order means and what they need to do next.
• Attend the final hearing: The final step is to attend the final hearing, where the court will decide whether to make the interim charging order final. To attend the hearing, you must complete a form N380 (Notice of hearing of application for charging order), and submit it to the court. At the hearing, you will need to present evidence to support your case, and the debtor will have the opportunity to present their case as well.

If the court decides to make the interim charging order final, you will be able to enforce the order and recover your debt. If the court decides not to make the interim charging order final, you may need to consider other debt recovery options. It’s important to seek professional advice before taking any action to recover a debt.

Charging Order Costs

In Charging Order cases, the typical rule is that the winning party will be required to pay the costs of the losing party. Charging Order Costs are typically restricted to fixed costs, and under CPR 45.6, a fixed fee of £110 is recoverable for solicitor’s, unless otherwise ordered by the Court.

Due to the modest award of charging order costs, combined with rising court costs, many litigants feel frustrated and seek ways to escape fixed costs in these types of cases.

As the Court has discretion to award costs, they may award costs on a standard or indemnity basis if the case is particularly complex, or if there are other factors that make it appropriate to depart from the fixed costs regime.  If an order for costs is made to be assessed by way of detailed assessment, then the assistance of a an expert Costs Draftsman/Lawyer will be required to prepare a Bill of Costs.

In some circumstances, there may be a contractual right to costs in the agreement with the debtor. CPR Part 48.3(1) addresses costs payable according to contract, with a presumption that they were reasonably incurred and are reasonable in amount, although that presumption may be rebutted if the terms of the contract are manifestly unreasonable. In the case of Gomba Holdings (UK) Limited v Minories Finance Limited (No.2) [1992] 3 WLR 723, Scott L.J. stated:

“an order for the payment of costs of proceedings by one party to another party is always a discretionary order: section 51 of the Act of 1981 (Supreme Court Act 1981) and where there is a contractual right to the costs, the discretion should ordinarily be exercised as to reflect that contractual right…”

Although this case pre-dates the CPR, it remains a good argument in relation to incidences where parties have a contractual agreement as to Charging Order costs, especially considering the court has discretion to make an order for costs when it deems it just to do so.

How can ARC Costs Assist with Charging Order Costs?

If you have been successful in securing a charging order against another party, ARC Costs can assist in the quantification and negotiation of charging order costs. If we believe there is an argument for escaping fixed costs due to a contractual agreement or the presence of an order for detailed assessment, we can seek your costs on an hourly rate basis.

ARC Costs have an experienced team of costs draftsmen and costs lawyers with the expertise to assist on costs matters in relation to Charging Order costs, whether you are the paying party or the receiving party.

We can provide assistance on drafting your costs budgets and bills of costs, ensuring they are reasonable and proportionate. We can also help you negotiate your costs with the other side by assisting in the drafting of points of disputes and replies.

We can be contacted using our email address at info@arccosts.co.uk, or by telephone on 01204 397302. For more information on legal costs, visit our services or legal costs page.

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