Orders for sale

A claim for an order for sale can be brought by:

• a creditor enforcing a charging order

• a trustee in bankruptcy

• a mortgage lender who is unable to bring possession proceedings under part 55 Civil Procedure Rules

• a homeowner where the joint owner or mortgage lender does not consent to a sale

If the court makes the order, the power to sell the property is vested in the claimant. An order giving a date for possession is normally made at the same time.

The rules for enforcing a charging order by sale of the property are contained in Civil Procedure Rule 73.10 and Practice Direction 73.

The claim

The claimant must complete and submit a claim on form N208 for an order for possession and sale. The claim is issued by the defendant's nearest County Court hearing centre.[1]

The particulars of claim must include:

• a copy of the charging order or other evidence of the claimant's financial interest in the property

• the sum of outstanding debt

• details of any prior first and second charges on the property

• the estimated sale price

• a witness statement setting out who is in possession of the property and their circumstances, to the best of the claimant's knowledge

For residential property, the particulars of claim must also state whether the following have been registered against the property:

• a land charge of class F, or

• a notice under s.31 Family Law Act 1996

• Part 8 Civil Procedure Rules applies to the claim.

The court's powers

If the order for sale is granted, the court has the discretion to make an order giving a date for possession at the same time. This enables the property to be sold with vacant possession.

The defendant can ask the court to attach conditions such as:

• a postponement of the date for possession and sale until a specified future date

• a suspension of the order on terms

• a minimum sale price or other requirements regarding the sale

The court may also dismiss the claim or adjourn it for a fixed period.

Acknowledgement of service

The claim pack contains an acknowledgment of service.

A defendant who wants to oppose the order for sale should both file the acknowledgment of service with the court within 14 days of the date of service and serve a copy of the claimant.

The defendant should use the acknowledgment of service to state the grounds on which they contest the claim, including a witness statement and a financial statement if payments are proposed.[2] Contesting the claim includes the defendant asking for the order for sale to be postponed or suspended.

If the defendant fails to file and serve an acknowledgment of service they can attend the hearing but may be denied permission to put forward a defence.[3] A hearing will be scheduled whether or not an acknowledgment of service has been filed. The court may give directions to the parties to file and serve evidence or more detailed legal arguments.

The defences available depend on the type of interest the claimant intends to enforce. The different types of interests the claimant may enforce are considered below.

The court will not consider whether the defendant is liable for the debt. The court may grant an adjournment to allow the defendant to make a separate application to set aside the underlying judgment or order if there is a reasonable prospect of success.

Grounds for defending the claim

The court is likely to order a sale unless the:[4]

• debt can be paid in a reasonable length of time

• hardship caused is disproportionate to the size of the debt and the circumstances of the creditor

The debtor could put forward arguments including:

• any alternative ways of discharging the debts

• the fact that the creditors interest are already protected by the charging order

• the detriment that will be suffered by innocent members of their household if the sale is allowed

All defences available against the making of a charging order also apply.

Postponing enforcement of the order to allow a sale

The defendant can ask the court to allow them to make a sale themselves, rather than allowing the claimant the power to conduct the sale. Arguments in favour of this are similar to those in mortgage repossession proceedings.

If there is no reasonable prospect of a purchase completing, there is no justification for postponing the claimant's possession of the property. The court will consider evidence available to it when making a decision about whether to postpone the date for possession.[5]

If the original charging order has been made against only one of two or more joint owners, the court should consider additional provisions in the Trusts of Land and Appointment of Trustees Act 1996.[6]

The additional considerations include the:

• circumstances in which the charging order was created

• situation of other people living in the property

• welfare of any children

• interests of other secured creditors

• interest of beneficiaries (for example a partner with a financial interest)

A claim for an order for sale to enforce a debt that is regulated by the Consumer Credit Act 1974 can only be issued where the debt exceeds £1000.[7] There is no financial threshold for enforcing other debts by order for sale.

The Limitation Act 1980 does not apply to the enforcement of court orders. This means charging orders do not become statute barred, so a claim for an order for sale can be made at any time.[8]

A trustee in bankruptcy has a duty to distribute the assets of a person who is bankrupt in accordance with the Insolvency Act 1986. Where the assets are held in the sole name of the bankrupt, the trustee may distribute the estate without considering the needs of anyone else.

An application for an order for sale is made to a district registry of the High Court. This is usually the debtor's nearest County Court hearing centre with a bankruptcy registry. The application is dealt with by a district judge with powers to hear insolvency cases.[9]

Joint owners

Where a home is held jointly between the bankrupt and another person, the trustee in bankruptcy is an 'interested person' who can apply for an order for sale under the Trusts of Land and Appointment of Trustees Act 1996.[10]

Time limits

The trustee has three years from the date of the bankruptcy to make an claim for an order for sale. After this time the property re-vests in the bankrupt and the trustee can take no further action.[11]

Circumstances the court must consider

The court must consider a range of interests when deciding on an claim for an order for sale by a trustee in bankruptcy, in particular:

• the interests of the bankrupt's creditors

• all the circumstances of the case other than the needs of the bankrupt

Where the property is occupied by a current or former spouse or civil partner, the court may also consider:[12]

• the conduct of the spouse or civil partner in contributing to the bankruptcy

• their needs and financial resources

• the welfare of any children

Financial limits

An order for sale must not be made where the net value of the bankrupt's interest in the property is below a set threshold, currently £1000.[13]

Presumption in favour of order for sale

Where the application is made 12 months after the bankrupt's estate has vested in the trustee, the court applies a presumption in favour of making an order for sale.[14]

Exceptional circumstances

The court can exercise its discretion to dismiss the claim or postpone a sale where there are exceptional circumstances.

The fact that an innocent third party will become homeless if a sale is ordered is not an 'exceptional circumstance' and will not displace the presumption in favour of making an order for sale.[15]

The courts have held that the interests of creditors will prevail over those of joint owners, partners and children, and that for circumstances to be 'exceptional', they must be more than those consequences of debt that would normally arise.[16]

Debtors should emphasise factors such as the effect on children who are approaching important exams, or where someone in the household has severe ill health. If a property has been substantially adapted to meet the needs of a person with a disability this may constitute exceptional circumstances.

Suitable alternative accommodation

In Pickard & Anor v Constable [17], the High Court refused to postpone a sale until the death of a seriously ill co-owner spouse of a bankrupt. This was due to the absence of compelling evidence that he had no realistic housing options were he to become homeless.

The Court postponed the date for possession for 12 months, but gave express permission for the spouse to apply for a further postponement. The Court stated that in order to have any hope of succeeding in such an application he would need 'cogent evidence' of his ill health and its impact on his housing options.

Securing a charging order instead of applying for an order for sale

The trustee in bankruptcy may consider applying for a charging order under the Insolvency Act 1986 if:[18]

• the bankrupt has a small amount of equity in the property

• it would prove difficult to sell

Mortgage lenders are normally required to issue possession proceedings under part 55 Civil Procedure Rules. They must not claim for an order for sale as an alternative to using the correct process or adhering to the mortgage pre-action protocol.

There may be some situations where a mortgage lender is unable to obtain a possession order under part 55 Civil Procedure Rules as a mortgagee in possession.

In these circumstances the lender may apply to court for an order for sale under the Trusts of Land and Appointment of Trustees Act 1996.

This is the case for equitable mortgages, which may be created when the mortgage deed has been improperly executed, or due to a third party having a binding overriding interest in the property.[19]

When deciding whether or not to order a sale, the court must have regard to various matters, including the:

• welfare of any child who occupies or may reasonably be expected to occupy the property as a home

• interests of any secured creditor or beneficiary

The court may postpone a sale, for example, where an occupier is unwell, but is unlikely to refuse an application for sale on this ground alone.

Time limits

A mortgage lender must bring a claim for an order for sale within 12 years of the cause of action.[20]

The cause of action is the later of the:

• last payment made, including by the DWP, a joint borrower or a person authorised by the borrower

• last formal acknowledgement by the borrower or a person authorised to make it

A formal acknowledgment means the debtor or a person authorised by the debtor has admitted the debt, for example by making an offer of payment or enquiring about the balance of an account. It must be made in writing.[21]

When the date for possession has passed, the claimant may apply for a warrant or writ of possession.[22] The court may suspend the warrant on payment terms or until a specified date.

The application to suspend the warrant is made on form N244 and should be filed at the court with a witness statement.