Archive for the ‘Debt Claims’ Category
In a previous article in the Newbury Business News, Paul Trincas, a corporate lawyer with Charles Lucas & Marshall wrote about how businesses could secure payment of debts and the types of enforcement mechanisms available. Here, he turns his attention to what is probably the most effective and secure method of ensuring debts are paid – charging orders.
What is a ‘Charging Order’?
A Charging Order is an Order of the Court charging a person’s interest in a property or properties, for the amount of the debt owed. It is therefore a type of security, like a mortgage, for the sum owed.
If a debtor ‘agrees’ to a charge over their interest in any property or properties they own, in respect of debts owed, then this can be achieved by lodging the relevant form with the Land Registry. However, this procedure is dependent upon the debtor agreeing to this being undertaken and in almost 99 per cent of cases, such agreement will not be forthcoming. In which event, a Charging Order will need to be applied for through the courts.
Who can apply for a Charging Order?
Anyone owed money can apply to the court for a Charging Order. However, a Charging Order cannot be applied for unless a judgment for the sum owed is first obtained against the debtor. Further the debt owed must be £1,000 or more.
Therefore, the person owed money must first go through the court system and obtain a judgment, and then, on the back of the judgment being obtained, a Charging Order can be applied for.
What is charged?
Only the debtor’s ‘interest’ in the property or properties can be charged. So, for example, if a husband and wife jointly own property in equal shares, then it is only the debtor’s 50 per cent interest in the property that can be charged.
When is payment made under a Charging Order?
Although a Charging Order on a property secures the amount owed, this does not mean that the monies owed will be paid immediately.
Generally, there are three trigger points when the sum secured by way of Charging Order, will be paid. They are:
- If the debtor dies, provided he/she is the sole owner.
- When the property is sold.
- If the person who has the benefit of a Charging Order applies to the court for an Order for Sale of the property.
Under the first two, it may be years before these trigger points are reached. However, the person owed money will be entitled to interest on the initial sum charged, currently, at 8 per cent per annum, from the date the Charging Order is made.
Under the final trigger point, the courts will generally only order a sale of the property if the amount of the debt is large.
For more information please contact Paul Trincas on 01635 521212 or email@example.com.
For a number of years now, parties have been expected to comply with Pre-Action Protocols before they resort to litigation. There are different Pre-Action Protocols for a range of disputes, and then finally the Practice Direction – Pre-Action Conduct for those not subject to a specific Pre-Action Protocol.
The Protocols explain how the court expects the parties to behave at the pre-action stage and encourage them to consider other methods by which they might resolve their disputes. Failure to comply might result in the court imposing cost sanctions on the offending party. In practice the court is unlikely to do so unless one party makes an issue of the other’s non-observance.
The Civil Procedure Rule Committee is now consulting a new Pre-Action Protocol for Debt Claims. It will apply in circumstances where a business (including sole trader) is claiming payment of a debt from an individual, or where both parties are sole traders. The draft Protocol requires the Claimant to include certain ‘initial information’ within its letter of claim whilst enclosing copies of specified documents (including a copy of the Protocol itself). The Claimant’s letter of claim ‘must’ contain a prescribed statement, essentially outlining the requirements of the Protocol and encouraging the debtor to take independent advice.
As the draft currently reads, the defendant will then have at least 28 days to obtain advice. The Protocol encourages the defendant to respond using a form attached to the Protocol at Annex 1. This will explain whether or not the debt is admitted or disputed.
The Committee has received objections to certain parts of the draft Protocol. It is hoped that everything will be finalised and the new Pre-Action Protocol for Debt Claims implemented by April 2015.
Businesses will be used to issuing proceedings themselves, or instructing their solicitors to do so, in order to pursue debts. Currently, it is necessary to comply with the Practice Directions – Pre-Action Conduct before issuing, but once a specific Pre-Action Protocol for Debt Claims has been adopted clearly a new set of requirements will need to be adhered to. If businesses are uncertain as to what sort of steps they should take in the run-up to issuing proceedings for a debt claim they should take advice from their legal advisor.
For further information please contact Paul Trincas on 01635 521212 or firstname.lastname@example.org