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Debt & Property Litigation Claims

Author:  Tamsin Reader

With the introduction of the Pre-Action Protocol on 1 October 2017, specialist Litigation lawyer, Tamsin Reader  discusses how the Protocol applies in debt and property litigation claims.

The general principle behind the new Protocol is to provide the Debtor with all the information needed in order to make an informed decision and respond regarding payment, or set out any issues they disagree with and try to avoid involving the Court.  Whilst this will clearly assist where large companies are recovering debts from individual consumers, does it affect the Landlord and Tenant relationship? 

The Protocol applies to any debt claimed by a business, including sole traders and public bodies from an individual (including a sole trader).  It will therefore apply to Landlords recovering a debt from a Tenant who is an individual.  The most common scenario would be in relation to rent arrears. 

If other Protocols are in place such as mortgage arrears, the debt claims Protocol will not apply.  However it is considered to be good practice to ensure that consideration is given to follow the protocol particularly where claims include rent arrears together with possession.   

There is no specific protocol for rent arrears or possession claims and it may seem unfair that the protocol applies to a landlord seeking rent arrears under a lease or tenancy agreement. However, as a claim for rent i.e. a debt claim is included, it will fall under the Protocol even though it is likely that this may complicate and delay the procedure.

The Protocol allows a period of up to 30 days for the debtor to respond and such time scales will only serve to delay the landlord receiving payment or being able to commence proceedings against the tenant and will clearly only increase costs. 

It is early days since the Protocol has come into force and it is not certain yet as to whether the Courts will refer to the Protocol in respect of possession claims which include rent arrears.  Whilst it could be argued by a Landlord that their primary purpose of the litigation is to gain rather than to recover the debt, the Protocol should not apply.  However, Landlords need to be aware that if the Court considers the protocol does apply and it has not been complied with, especially where the defendant raises this as part of their defence, that there may be risks of sanctions being applied.  This is usually by way of a Costs Order.

Commercial Property Arrears

Where a commercial lease is let to an individual and rent arrears arise, the Protocol will apply.  To avoid possible sanctions the Protocol should be complied with.  The same is true where a claim is made against an individual guarantor. 

Whilst it may affect debt claims, the Protocol does not have any impact on other actions available to commercial landlords where there are arrears such as forfeiture by peaceful re-entry and commercial rent arrears recovery (CRAR).  Landlords must consider the protocol carefully, particularly before issuing a claims against an individual and if in any doubt ensure that a letter is sent pursuant to the protocol. 

Both residential and commercial landlords must consider the Protocol carefully, particularly before issuing a claim against an individual and if any doubt ensure that a letter is sent pursuant to the Protocol.

For further information on the Protocol and property disputes, please contact Tamsin Reader or another member of our Dispute Resolution Team.

 

On the 1st October  2017, the Pre-Action Protocol for Debt Claims came into force.  The general principle behind the new Protocol is to provide the Debtor with all the information needed in order to make an informed decision and respond regarding payment, or set out any issues they disagree with and try to avoid involving the Court.  Whilst this will clearly assist where large companies are recovering debts from individual consumers, does it affect the Landlord and Tenant relationship? 

 

The Protocol applies to any debt claimed by a business, including sole traders and public bodies from an individual (including a sole trader).  It will therefore apply to Landlords recovering a debt from a Tenant who is an individual.  The most common scenario would be in relation to rent arrears. 

 

If other Protocols are in place such as mortgage arrears, the debt claims Protocol will not apply.  However it is considered to be good practice to ensure that consideration is given to follow the protocol particularly where claims include rent arrears together with possession.   

 

There is no specific protocol for rent arrears or possession claims and it may seem unfair that the protocol applies to a landlord seeking rent arrears under a lease or tenancy agreement. However, as a claim for rent i.e. a debt claim is included, it will fall under the Protocol even though it is likely that this may complicate and delay the procedure.

 

The Protocol allows a period of up to 30 days for the debtor to respond and such time scales will only serve to delay the landlord receiving payment or being able to commence proceedings against the tenant and will clearly only increase costs. 

 

It is early days since the Protocol has come into force and it is not certain yet as to whether the Courts will refer to the Protocol in respect of possession claims which include rent arrears.  Whilst it could be argued by a Landlord that their primary purpose of the litigation is to gain rather than to recover the debt, the Protocol should not apply.  However, Landlords need to be aware that if the Court considers the protocol does apply and it has not been complied with, especially where the defendant raises this as part of their defence, that there may be risks of sanctions being applied.  This is usually by way of a Costs Order.

 

Commercial Property Arrears

 

Where a commercial lease is let to an individual and rent arrears arise, the Protocol will apply.  To avoid possible sanctions the Protocol should be complied with.  The same is true where a claim is made against an individual guarantor. 

 

Whilst it may affect debt claims, the Protocol does not have any impact on other actions available to commercial landlords where there are arrears such as forfeiture by peaceful re-entry and commercial rent arrears recovery (CRAR).  Landlords must consider the protocol carefully, particularly before issuing a claims against an individual and if in any doubt ensure that a letter is sent pursuant to the protocol. 

 

Both residential and commercial landlords must consider the Protocol carefully, particularly before issuing a claim against an individual and if any doubt ensure that a letter is sent pursuant to the Protocol.

 

For further information on the Protocol and property disputes, please contact Tamsin Reader

Posted on 20/11/2017 by Pam Bowring

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