Businesses (including sole traders and public bodies) claiming debts from individuals (including sole traders) will be required from 1 October 2017 to comply with the new Pre-Action Protocol for Debt Claims.
The general principle of the Protocol is to provide the debtor with all the information from the outset to try and avoid court proceedings later on. The Protocol will go further by extending the time for the debtor’s response to 30 days and allowing a further 30 days after that before a business will be able to bring proceedings.
Whilst consumers will welcome the additional protection, businesses will be obliged to wait at least 60 days before starting court action to recover their debts.
Businesses should address their current debt claims procedure in order to be compliant and ensure that any letter before claim supplies all copies of the relevant documents to avoid any unnecessary delays caused by a debtor requesting additional information.
Company landlords must also comply with the Protocol when pursuing individual tenants for rent arrears.
Business-to-business debts are not affected by the new Protocol nor are those debts governed by existing protocol, such as construction disputes or mortgage arrears.
Operative date: October 2017
The upcoming requirements may result in earlier settlement of more cases or create a shift towards a preference for other methods of debt recovery, such as serving a statutory demand or forfeiture.
If you have any questions please do not hesitate to get in touch.
Phoebe Gunputh Phoebe joined Helix Law to continue her training in litigation and to gain experience in all areas of Helix Law’s practice. She obtained a first-class Law degree from Sussex University before completing a Masters in International Business Law with Queen Mary University at their institute in Paris. Phoebe is currently studying the distance-learning Legal Practice Course and looks forward to qualifying as a solicitor in early 2018.
This article is written to raise awareness of the issues it discusses and it may not be updated after it is first written, even if the law changes. It is not intended to be legal advice and cannot be relied on as such. Helix Law is not responsible or liable for any action taken or not taken as a result of this article. If you think the matters set out affect you and you wish to apply them to your particular circumstances then we are happy to give you free initial telephone advice.