what is a Charging Order

[annaspanna]

listed on a CT?

[Winston001]

An Order made by the Court charging that property with a debt owed by the owner. You can think of it as a mortgage which is released when the debt is paid.

[Keys]

listed on a ct?

Ouch!

[Keithw]

Anna is this yours, or on a property you are looking at.
It can create a problem with settlement, particularly if the place is being sold for less than the mortgage.
As i understand it, the charge holder can hold out to be paid, whereas a second mortgage holder seems to be able to be blown away in the case of a shortfall in sale proceeds. Dont quite understand the difference, since a mortgage is in effect a charge, but a charge holder seems to have more effective power to insist on payment.ie they will not release their charge until it has been paid out, so clear title cannot be given to a purchaser.

[annaspanna]

Interesting Keith.
Its listed on the title by Marac Finance, its on a mortgagee sale i was looking at in chch.

[Xav]

The chargeholder cannot hold out to be paid. The charging order will disappear if the first mortgagee sells the property under its power of sale.

That is always the case for subsequent charges except for a caveat securing an equitable interest which came into existence prior to the mortgage being registered (but the caveat was registered after).

[Keithw]

So is a court order or something similar required to enforce that "power of sale", ie can the charge holder delay a settlement by insisting that all the legal process is followed, or is it as simple as - bank auctions property, sale is for less than mortgage, bank keeps all proceeds & releases mortgage, subsequent charge holders must at the same time release their charges/ mortgages, despite receiving no money.?

[Xav]

A court order is only necessary for the exception I outlined regarding the caveat (not even that can prevent settlement, for settlement to be prevented the mortgage would have to be a fraud).

The way it works is that on settlement the bank registers a special type of transfer (transfer pursuant to power of sale). When Land Information New Zealand processes the transfer it removes the subsequent charges automatically. There is no need to obtain a withdrawal/discharge from the subsequent chargeholders (they are protected by s185 of the Property Law Act).

[One]

Apologies for my ignorance, but what's a CT?

[Keys]

Apologies for my ignorance, but what's a CT?

I believe that it's a Certificate of Title.

Remember, if you don't ask the question, then you are ignorant. Never be afraid to ask.

[Winston001]

Certificate of Title. There used to be wonderful old velum or goatskin title deeds bound in large books recording each title to land in NZ. Today we are left with an A4 printout which is a very pale representation of the most significant asset most will ever own. Sad IMHO.

Titles were (and still are) referred to by Volume and Folio. Thus CT OTA3/205 is Otago Land Registry, Volume A3 Folio (page) 205. The books are all stored by LINZ but everything is digital images now.

[essence]

I've only ever come across a Charging Order once and that was on a CT for a property going to Mortgagee sale.

The owners had signed up for a charge card with Placemakers, updated the house and had made no attempt to pay the account.

Placemakers then placed a Charging Order over the property, so they (hopefully!) would get paid when the property sold.

If there isn't enough money to pay the mortgage, then the person with the Charging Order misses out. Not sure if it stays on the Title for the "new" owner but I think that would be highly unlikely.

[annaspanna]

When you look at this example there does not seem to be much distinction between a Charging order and a Caveat?

[Xav]

If there isn't enough money to pay the mortgage, when the person with the Charging Order misses out. Not sure if it stays on the Title for the "new" owner but I think that would be highly unlikely.

The only way you could take title with the Charging Order still there is if you consented to it (ie. you took a transfer subject to the Charging Order). That would be very unusual and not something you could do without being aware of it.

If you sign up to buy a property then in the absence of anything else it is the vendor's responsibility to remove all of the charges so that it can give you clear title.

When you look at this example there does not seem to be much distinction between a Charging order and a Caveat?

They are actually quite different but I suppose the way caveats are often used by finance companies does have some similarities.

All a charging order does is:

1. Ensure that the charge holder will get paid on sale of the property (assuming the sale price is high enough to do so after paying any prior mortgages etc); and

2. Allow the charge holder to apply to the court for a writ of sale allowing it to sell the property.