How to remove a charge on a property

We've written about 'what a charging order is'. Now it's time to understand the steps needed to remove a charge from your home.

Charge on a property

A charge on a property (Charging order) is when an unsecured creditor or lender secures your debt against your home. It's not a situation anyone wants to be in, particularly because it can lead to an order of sale - where the creditor forces you to sell.

A charging order is actually the third of a series of court actions creditors can take in attempting to reclaim their loan from you...

1. County Court Judgments (CCJ)

Following a court hearing, a County Court Judgment is the first step creditors can take in securing an unsecured debt against your property, and reclaiming what they are owed.

2. Interim charging orders

Once an interim is issued, the creditor is entitled to receive a share of the profit from a sale of your home.

3. Final charging order

This court order consolidates a creditor's legal interest in the property. Provided that the court agrees, it's now much more likely that the creditor will recover the money owed from your home sale.

4. Order of sales

Failure to repay your charging order debt may lead to a court-ordered property sale. The proceeds will then be distributed to creditors holding a legal charge on your home.

Consumer Credit Act

The 1972 Consumer Credit Act states that for charging orders related to consumer credit agreements, a CCJ is required, and the debtor must have breached a repayment plan. If your debt falls under this Act (e.g., credit card, personal loan), interest freezes upon the CCJ's issue. For non-Act debts over £5,000, an 8% statutory interest may apply.

Can you dispute a charging order?

By the time a final charging order is issued, there are very few options left. However, there are certain circumstances where you may be able to dispute an interim charging order:

You’re a joint owner

If the charging order is made against a house you jointly own, but the debt is only in your name, the creditor can only target your share of the property. Other joint owners are protected.

Existing payment plans

If you already owe money to other lenders and have existing payment plans, you could make the case to a court officer that a charging order will impact your ability to repay existing debts.

Bankruptcy

Your potential for bankruptcy could be used to argue that a charging order would provide an advantage to one creditor over other unsecured creditors.

How to remove charge on property

Unless you can refute the nature of the charge, you only really have one option - to pay back the debt.

Here are some steps to follow:

1. Speak to someone with experience

Before you contact the creditor, speak to a solicitor or adviser who can provide guidance on available options. Whether you can afford a solicitor or not, we recommend contacting the debtor's charity StepChange. They can even help renegotiate with creditors on your behalf.

2. Contact the creditor and negotiate

If there's a creditor with a secured debt against your home, you can contact them to discuss the possibility of removing the charge. Typically, this involves arranging a new form of payment plan with them. Remember - creditors want you to be able to pay back the loan. The worst thing for both parties is an order of sale.

If the charge is a mortgage or a lien based on unpaid debts (e.g., property taxes, contractor's fees), you'll likely need to pay off the debt in full, including any interest and penalties.

3. Pay off the debt

Once you've paid off your debt, your creditor should provide you with a satisfaction or release of the charge.

How long does it take to remove a charge from the Land Registry?

Typically, it takes just over two weeks to process the removal request, with the lender having 15 days to respond to the Land Registry application. However, processing times can vary.

In most cases, a charging order remains until the debt is fully repaid. An exception exists in Scotland, where charging orders are automatically removed after 12 years, regardless of full debt repayment.

What if my lender does not remove the charge after repayment?

To remove an unreleased charge, apply to the Land Registry using a CN1 form and proof of debt repayment. The Land Registry will contact the creditor, who has 15 days to respond. If they don't, the charge will automatically be removed.

What happens if I don’t pay a final charging order?

With a final charging order one step behind an order for sale, the risks are pretty dire. If you don't pay a charging order, you can expect your creditors or lenders to eventually issue an order of sale through the courts and force your home sale.

How long can a charge stay on a property?

A property charge persists as long as the property is collateral for a credit agreement - meaning it remains until the debt is settled. In England and Wales, this lasts until debt repayment. In Scotland however, a charging order lasts for 12 years.

Summary: No walk in the park!

In a nutshell, dealing with a property charge is no walk in the park. It can put your home at risk, and you need to play your cards right. Whether you're looking to dispute it or pay it off, just remember, time is of the essence, and ignoring a charging order can land you in hot water. Stay informed, take action, and protect your property.