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Understanding the legal position

As part of our debt recovery procedures, we often have to instigate legal action against non-paying homeowners to recover the funds due to the development. We utilise a Solicitor to raise these actions on our behalf.  The action is raised after following our internal debt recovery procedures and after various attempts to contact the owner to settle the sums due.

A formal Court Summons is raised with the appropriate court and in the majority of cases served via recorded delivery or in person by Sheriff Officers. Upon service of the summons, court expenses are recoverable from the defendant. Upon successful service of the summons, the defendant is required to respond to the court by the return date detailed within the summons.  The defendant has three options at this time:     

  1. Accept the liability and settle the sums due prior to the return date.
  2. Submit a Time to Pay Application which will be considered by the court.   
  3. Defend the position.

Acceptance of the liability and settlement of sums due

Acceptance of the liability and settlement of the sums due, plus the court expenses recoverable, resolves the matter and no further action is required from the defendant. There is no negative impact on the defendant’s credit file in this case.

Time to Pay Application

Submission of a Time to Pay Application, if awarded by the court, allows the defendant the opportunity to settle the sums due, plus the court expenses recoverable, over a number of instalments. This is a Court Order (decree) referred to as an Instalment Decree which will be recorded on the defendant’s credit file.

Defending the position

Defending the position requires a hearing to be set by the court to allow both parties, claimant and defendant, to submit evidence to allow the court to determine whether the debt is due and payable. If the court finds in favour of the claimant, decree will be granted against the defendant which is a Court Order to allow the claimant to recover the funds due, plus the court expenses recoverable. Once decree has been granted, the defendant has one calendar month to settle the decree. If settlement is made within one month, the decree can be removed from public record with Registry Trust who will in turn advise credit agencies to remove from their files. If the decree is settled greater than one calendar month after being granted, the decree can be marked as ‘satisfied’ but will remain on the defendant’s credit file for a period of six years. If the decree is not settled, it will remain on the defendant’s credit file for a period of six years as an outstanding decree. Award of decree by the court allows the claimant to carry out further enforcement action on the defendant. This is initiated with a Charge for Payment, a formal demand for payment served by a Sheriff Officer. Further enforcement can include bank arrestment, rent arrestment, earnings arrestment, attachment orders and inhibition.  Sequestration (bankruptcy) proceedings can also commence if the debt exceeds £3,000 (temporarily increased to £10,000 due to Covid-19).

Instigating court action 

Following completion of our internal debt recovery procedures, James Gibb will instigate, via our Solicitor, court action on non-paying owners. We will seek decree with the aim of resolving matters prior to the decree being awarded. We take this action to protect the development funds and recover monies due on behalf of all co-proprietors within the development. This course of action has been employed for a number of years and we are able to demonstrate the return achievable from this with the below illustration.

A development of thirty properties had a debtor owing £1,500.  Court action was raised at a cost of £200 to the development.  The award for decree was granted with expenses recoverable of £150 from the defendant. The net cost to the development was therefore £50, or £1.66 per owner.  The principal sum recovered was £1,500.  Had court action not been instigated, following exhaustion of our internal procedures, the principal sum would be deemed irrecoverable and been charged to the remaining homeowners at a cost of circa £50 per property.

The aim of following this course of action is primarily to recover the unpaid sums from non-paying homeowners. However, it is also carried out to ensure homeowners recognise we take the matter of non-payment seriously and will take the necessary legal steps required to recover the funds due. Further enforcement, inhibition and sequestration proceedings will always be considered on a case-by-case basis to ensure the best course of action, with the best likelihood of success, and the best financial decision, is made on behalf of the development overall.

James Gibb doing it the right way

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