Charging Orders and Judgments Payable by Instalments.
An update for landlords and letting agents pursuing arrears against a guarantor, or an evicted tenant that now has property.
This note is really aimed at those with some experience of recovering debts. If that isn’t you, please feel free to get in touch at
https://www.sjvsolicitors.co.uk/tenant-eviction/ or email us at firstname.lastname@example.org, we’ll be happy to help.
Where a tenant has been subject to eviction by the landlord, it may be that the landlord has a money judgment from the court. The debt can then be enforced against the evicted tenant or a ultimately, a guarantor if there is one.
It should usually the case that as well as an order for possession, the landlord obtains an occupation charge, a money judgement including interest on the arrears, and the appropriate order for costs.
If the tenant who was subject to eviction, now has a property or a guarantor is available, a charging order is one of a number of ways for the landlord to enforce the judgment.
It used to be that if the court ordered a judgment to be paid by instalments, the landlord had a very time consuming and somewhat uncertain path to obtaining a charging order against the tenant. The court now has a discretion to make a charging order were the underlying judgment orders a debt to be paid by instalments, and there has been no breach of the instalment order.
Section 93 of the Tribunals Courts and Enforcement Act 2007
came into force on 01.10.12. Section 93 (2), (3) & (4) amends the Charging Order Act 1979.
Note that the court is still not obliged to make a charging order where landlord has an instalment order against the evicted tenant, it now has discretion.
The court “must” take account of the absence of default when deciding whether to make a charging order final. The landlord cannot enforce the charging order against the evicted tenant until there has been default. The changes are not retrospective so judgments made before 01.10.12 are not affected.
The interim charging order will continue to be made without a hearing and any issues left to be resolved at the final charging order hearing. A possible exception is where the judge considering the interim charging order judges the amount of the debt to be too small and decides that a charging order would be disproportionate. There is no minimum amount which makes applying for charging orders for smaller sums a bit uncertain. The Tribunals, Courts and Enforcement Act 2007 allows a minimum figure to be set, however, at the time of writing, the figure has yet to be settled. We recently made an application based on a debt of £600. The application was made with fingers crossed. Happily, the charging order was made on that occasion.
There is no need now to make an application for redetermination in order to obtain a charging order where an instalment order has been made.
It remains to be seen how courts will use their new discretion. When the landlord or agent is before the district judge, the usual arguments should apply. The principle points under consideration will be the size of the debt and the length of time it will take to be repaid. If the judgment debtor must wait a long time for their money, then it is reasonable for them to have security.
The court should also be reminded that the charging order cannot be enforced whilst there are no arrears under the instalment order. This may be somewhat academic as an application to the court must be made by the landlord in order to enforce the charging order against the tenant and experience suggests that rarely will a court be persuaded to order sale of a family home based on a charging order.
The charging order is in reality more a device to obtain security than to obtain immediate payment. Other forms of enforcement may be pursued by the landlord against the evicted tenant simultaneously with the charging order. Further points that might be argued in support of the application are that: the former tenant may take the debt more seriously if it is secured, the landlord may be more forbearing if they are secured and that if the landlord is denied a charging order, they may pursue less benign forms of enforcement.
As always, feedback and experience is welcomed.
Simon Vollans LL.M (Bristol) Barrister and Solicitor – 29.10.12