A charging order is a way of securing a judgement debt of the court, by placing a charge over a judgement debtor’s interest in land, or certain other assets. The court’s power to make a charging order over a judgement debtor’s property and assets is contained in the Charging Orders Act 1979.
Charging orders secure a sum payable under a judgement or order of the court, and the sum charged is the amount owed under the terms of the judgement plus any interest and costs. The existence of a charging order does not entitle the creditor to be paid immediately, but it can secure the amount owed, and therefore subsequent repayment.
Obtaining a charging order is a two-stage process:
- The first stage involves applying for an interim charging order; and
- The second stage involves applying for a final charging order.
However, in order to ensure realisation of funds and that the creditor is paid, there is a third stage which is applying for an order for sale.
In order to obtain an interim commercial litigation charging order, the creditor should:
- Check that there is a judgement debt due or enforceable.
- Research the judgement debtor’s assets to establish that there are assets which can be charged, and which may realise sufficient funds to discharge the judgement debt. You can evaluate ownership of property by conducting relevant searches at the Land Registry.
- Check that the amount of the debt is above the minimum threshold for an order for sale. This is because if your ultimate goal is to obtain an order for sale, and this is not possible because the judgement debt does not satisfy the relevant criteria, then it may not be worth obtaining a charging order as it cannot be enforced.
It should be noted at point 3 above that as the minimum threshold only applies to applications for orders for sale, it arguably does not prevent the obtaining of a charging order in those cases. However, the person with the benefit of the charging order would not be able to go on to obtain an order for sale.
An application for a charging order can be made at any time after judgement has been obtained. However, you should note that delay may result in loss of interest.
An application for a commercial litigation charging order must be in the prescribed form and at the time of writing this article the forms are:
- Form N379 if the application relates to land.
- Form N380 if the application relates to securities.
Christian Browne is a corporate solicitor and the Managing Director of Summerfield Browne Solicitors. Summerfield Browne Solicitors have offices in London, Birmingham, Oxford, Cambridge, Northampton and Market Harborough, Leicester. Christian Browne is also a legal advisor with the Institute of Directors in London.