A big change in debt-chasing came in on 1st October 2017, but what does the Pre-Action Protocol for Debt Claims actually mean to letting and estate agencies in practice?
The Protocol applies to businesses which are seeking a payment of a debt from individuals or sole traders. Therefore any debt that the agency is pursuing, including fees from individual clients, should be pursued correctly. The aim of the Protocol is to reduce the number of cases which proceed to Court action.
Here are the key stages:
1. The debtor should be served with a detailed letter before claim which lays out how much is owed, the creditor and debtor details, whether interest is charged and how the debt arose. Enclosed with the letter before claim should be a Reply Form, Standard Financial Statement and Information Sheet.
2. The debtor then has 30 days to reply via the Reply Form and they have the opportunity to ask for more information within this time. If no response is received after the 30-day period legal proceedings can commence.
3. If the Reply Form hasn’t been properly completed, the onus is on the creditor to discuss this with the debtor.
4. If the debtor completes the Financial Statement and proposes a payment schedule, efforts should be made to reach an agreement and the creditor has to take into account whether they think the proposal is affordable for the debtor.
5. If the debtor’s proposal is not acceptable and an agreement cannot be reached both parties are encouraged to seek alternative dispute resolution.
6. Ultimately, if the creditor decides to refuse a proposal they should send a written explanation to the debtor of why it has been refused. Then legal proceedings can commence (but it is best to give the debtor 14 days’ notice of this intention).
Full details are available here:
Written by Caroline Kenny AssocRICS DipRLM FARLA(retd)
Caroline Kenny is a freelance residential lettings consultant as well as a Business Development Consultant to the UK Association of Letting Agents (UKALA)