Update: Holmes & Hills no longer offer a fixed rate debt recovery service. However, our specialist debt recovery solicitors are still available to offer advice, so contact us on 01206 593933.
The use of Sheriff’s Officers has been a popular method in the enforcement of County Court Judgments against individuals and businesses in matters concerning debt recovery. The work of Sheriff’s Officers can be seen in the BBC television programme ‘The Sheriffs Are Coming’, however, the term Sheriff is no longer being used, it is being replaced with the term High Court Enforcement Officer (‘HCEO’). The changes being implemented were primarily designed to protect the public from aggressive bailiffs, however they may have an impact on the effectiveness of this enforcement method. The following changes will come into effect on 6th April 2014.
Schedule 12 of Tribunals, Courts and Enforcement Act 2007, and The Taking Control of Goods Regulations 2013 outline new prescribed process for the recovery of goods from start to finish. It remains the case that only Judgments of £600 or above can be enforced by this method.
Goods which cannot be taken, are goods that are necessary for the personal use of the debtor in his employment, business, trade, profession or education, up to the value of £1,350. It is not clear whether one item (such as a vehicle) worth over £1,350 would be exempt, although this point is arguable. Goods that constitute the basic domestic needs of the debtor are exempt, such as basic white goods, beds and bedding. Where the goods are on the premises of the debtor, and that premises is occupied by the debtor as his principal home, those goods are exempt.
The most significant change is probably that HCEOs will be required to provide the debtor with not less than 7 clear days notice before they take control of goods. No notice to the debtor is currently required. The court may order a shorter period to be given to the debtor, but only if the creditor can show it is likely that the goods will be moved or disposed of in order to avoid them being taken by the HCEO. Quite what evidence the court will require remains to be seen. Even if the application is successful, the debtor will still receive notice of the visit, albeit the period of notice will be less than 7 days. This change is aimed at providing the debtor with fair warning and an opportunity to settle the debt without becoming liable for attendance fees of the HCEO. While this may provide vulnerable debtors with an opportunity to make payment before HCEO fees are incurred, in respect of debtors who have no intention of paying, it will provide them with the opportunity to remove, hide, or sell their assets prior to the HCEO’s visit.
The HCEO is no longer permitted to enter premises via an open window or skylight. Hours or entry must be between 06.00 and 21.00 except where the premises are not wholly residential, and then entry can be during hours where the premises are open for trade or business. Entry can be made on any day of the week (previously entry could not be on a Sunday).
There is a new staged fee structure, it is aimed to encourage early compliance of the debtor. There are costs implications if the debtor does not comply because the relevant fees will be added to the amount being sought from the debtor (aside from the first fee of £75 if no successful recovery is made). The stages and fees are as follows:
1. Compliance Stage – a notice is sent to the Judgment debtor giving them 7 clear days to make payment to prevent an HCEO attending to seize (take control of) goods. If the debtor engages at this stage, the fixed fee is £75 (this will be added to the amount to be recovered from the debtor, however if a successful recovery is not made, it is paid by the creditor);
2. First Enforcement Stage –if the debtor contacts the HCEO and enters into a controlled goods agreement (instalment arrangement), the additional fixed fee is £190, in addition there is a percentage fee of 7.5% for amounts recovered exceeding £1,000;
3. Second Enforcement Stage – where the debtor refuses to make payment or enter into a controlled goods agreement (instalment arrangement), or if the agreement is broken, the HCEO will re-attend the premises to take control of goods. The additional fixed fee is £495;
4. Sale or Disposal Stage – where goods are actually removed from the debtor’s premises and sold, the additional fixed fee is £525, in addition there is a percentage fee of 7.5% for amounts recovered exceeding £1,000.
Changes in respect of the recovery of commercial rent arrears also come into force on 6th April 2014. A landlord under a lease of commercial premises may use the procedure in schedule 12 (of the Tribunals, Courts and Enforcement Act 2007) as outlined above, to recover the rent due to him. The new procedure is to be known as Commercial Rent arrears Recovery (‘CRAR’), and the terms ‘distress’ and ‘distraint’ have been replaced with the phrase ‘taking control of goods’. Again, the Enforcement Agent must serve a notice on the tenant, giving a minimum of 7 days notice for the tenant to pay before the Enforcement Agent can attend the premises to take control of goods. The minimum amount of net unpaid rent must be an amount equal to 7 days’ rent. The amount owed must be in respect of rent only, and not in respect of other outstanding amounts such as insurance or service charges. These amounts will have to be pursued separately through County Court proceedings.
Previously, a landlord was allowed to enter a leased property without prior notice and seize goods owned by the tenant in order to sell them and recover rent arrears. Alternatively, a landlord was able to serve notice upon sub-tenants to redirect the rent and such notice would take immediate effect. Under the new rules, notices to the sub-tenants will not take effect until 14 days after service.
Holmes & Hills Solicitors has a team of debt recovery providing fixed-fee debt recovery services to businesses across the South East and east Anglia.
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