Discussing UK law. Links: swarb.co.uk | law-index | Acts | Members Image galleries

Solicitor fails to pay off charge on sale

Land, Registered Land, Planning law etc.

Solicitor fails to pay off charge on sale

Postby theycantdothat » Sat May 28, 2016 10:24 pm

This is a good one which has happened to a friend of mine.

She owned a property subject to a mortgage to one bank and a charging order in favour of another. Even though it would have had to have been paid anyway, she instructed her solicitor that the amount owing in respect of the charging order was to be paid out of the proceeds of sale. On completion (at the end of last year) the solicitor accounted to her and she did not bother to look at the completion statement - she is that sort of person. Anyway, she has exhausted what she received paying off other debts and carrying out property maintenance and currently has no funds to discharge the charing order. She has just received a letter from the bank's solicitor asking what her plans are to repay the debt. Upon investigation it appears that somehow or other the charging order was not cleared off on completion and the new owner has it on his title. It is not known at this stage if my friend's solicitor gave an undertaking to discharge the charging order.

If an undertaking was given my friend's solicitor would have to clear the charge, but presumably he can recover the amount (? less any interest which has been added since completion) from my friend.

If no undertaking was given then the buyer can insist that his solicitor clears the charge, but presumably the solicitor can recover the amount (? less any interest which has been added since completion) from my friend.

The interesting question, perhaps unlikely to arise since one solicitor or the other will have to clear the charge, is whether if the charge were not discharged the bank would be entitled to an order for sale even though the value is small compared to the value of the property. The argument would be that the bank expected to get paid on a sale and it is not its fault if the owner failed to ensure it was repaid. If an order is not given a charging order is effectively no security at all.
theycantdothat
 
Posts: 1118
Joined: Fri Nov 02, 2012 7:36 pm

Re: Solicitor fails to pay off charge on sale

Postby atticus » Sun May 29, 2016 7:33 am

The failure to read the completion statement was not good. Surely she must have known what she was expecting to receive: what if she had been paid a few grand less? This is likely to come back to your friend one way or another.

Undertakings will be as between giver and recipient. If one was given, the solicitor (or insurers) will be entitled to look to your friend.
User avatar
atticus
 
Posts: 19434
Joined: Sun Nov 11, 2012 2:27 pm
Location: E&W

Re: What's been said?

Postby atticus » Sun May 29, 2016 8:48 am

The buyer may have questions to ask of his conveyancer.
User avatar
atticus
 
Posts: 19434
Joined: Sun Nov 11, 2012 2:27 pm
Location: E&W

Re: Solicitor fails to pay off charge on sale

Postby theycantdothat » Sun May 29, 2016 8:55 am

atticus wrote:The failure to read the completion statement was not good. Surely she must have known what she was expecting to receive: what if she had been paid a few grand less? This is likely to come back to your friend one way or another.

Undertakings will be as between giver and recipient. If one was given, the solicitor (or insurers) will be entitled to look to your friend.


All agreed. My friend is not looking to get out of paying.

The main point of my post was the last paragraph. If the bank went to court for an order for sale would the court be justifified in making the order despite it being hard on the new owner?
theycantdothat
 
Posts: 1118
Joined: Fri Nov 02, 2012 7:36 pm

Re: Solicitor fails to pay off charge on sale

Postby atticus » Sun May 29, 2016 9:28 am

What is the purpose of charging land with payment? If you buy land subject to a charge, you buy it subject to the fact that it is charged to secure payment of the debt.
User avatar
atticus
 
Posts: 19434
Joined: Sun Nov 11, 2012 2:27 pm
Location: E&W

Re: Solicitor fails to pay off charge on sale

Postby theycantdothat » Sun May 29, 2016 4:00 pm

atticus wrote:What is the purpose of charging land with payment? If you buy land subject to a charge, you buy it subject to the fact that it is charged to secure payment of the debt.


Obviously.

The point here is that if you own property and a creditor secures a charging order on it the courts may be reluctant to grant an order for sale unless the circumstances are exceptional. The creditor's expectation is that he will be paid when the property is sold, subject of course to there being sufficient equity. The question is whether on a change of ownership where the charge is not discharged it is reasonable for the court to order a sale. If it does not the creditor's expectation is confounded and the whole point of charging orders called into question.
theycantdothat
 
Posts: 1118
Joined: Fri Nov 02, 2012 7:36 pm

Re: Solicitor fails to pay off charge on sale

Postby atticus » Sun May 29, 2016 4:43 pm

Hold on. If a property is sold subject to a charge, it is sold subject to that charge. Why should the creditor's rights be adversely affected by the change of ownership of the legal title?
User avatar
atticus
 
Posts: 19434
Joined: Sun Nov 11, 2012 2:27 pm
Location: E&W

Re: Solicitor fails to pay off charge on sale

Postby theycantdothat » Mon May 30, 2016 8:33 am

I was not suggesting that the chargee's rights are adversely affected by a change of ownership.

Whether it is true or not, let's take it as a fact that if a creditor obtains a charging order it will be very difficult to get an order for sale against the debtor. What the creditor gets effectively is the assurance that when the property is sold he will get his money, assuming there is sufficient equity.

What happens if the (hopefully) unusual situation arises where a conveyancer negligently allows a client to buy the property subject to the charging order?

On the one hand the new owner insists that it is wholly unreasonable that an order should be made because he owes the chargor no money and it was all down to his conveyancer.

On the other hand the chargor argues that if no order for sale is made it means that a property subject to a charging order can be sold without discharging it and the chargor permanently kept out of his money.

You are the judge, what is your decision and reasons for it?
theycantdothat
 
Posts: 1118
Joined: Fri Nov 02, 2012 7:36 pm

Re: Solicitor fails to pay off charge on sale

Postby atticus » Mon May 30, 2016 12:12 pm

Let's not take that as a fact. Charging orders can be enforced by orders for sale.

Of course if there has been a conveyancer who has acted negligently, that conveyancer may face a claim. Her or his insurers may settle that claim by redeeming the charge.
User avatar
atticus
 
Posts: 19434
Joined: Sun Nov 11, 2012 2:27 pm
Location: E&W

Re: Solicitor fails to pay off charge on sale

Postby theycantdothat » Mon May 30, 2016 2:49 pm

atticus wrote:Let's not take that as a fact. Charging orders can be enforced by orders for sale.

Of course is there has been a conveyancer who has acted negligently, that conveyancer may face a claim. Her or his insurers may settle that claim by redeeming the charge.


Fine.

But can we get to the whole point of this thread which is nothing to do with negligence, but whether in the circumstances set out a court ought to make an order for sale?
theycantdothat
 
Posts: 1118
Joined: Fri Nov 02, 2012 7:36 pm

Next

Return to Land Law

Who is online

Users browsing this forum: No registered users and 1 guest