The Pre-Action Protocol for Debt Claims commences on 1 October 2017 for England and Wales.
The Protocol applies to any business (including sole traders and public bodies) claiming payment of a debt from an individual (including a sole trader). It therefore applies to all landlords recovering a debt from a tenant and/or guarantor (where the tenant/guarantor is an individual). The protocol will also apply to letting agents who are seeking to recover a debt owed to them directly from an individual.
The aim of the protocol is to encourage early engagement and communication between the parties and enable the parties to resolve the matter without the need to start court proceedings.
Letter of Claim
A Letter of Claim must be sent by the creditor (usually by landlord or agent for our audience) which must contain various information including (for the full list, please consult the protocol):
- the amount of the debt
- whether there is interest or other charges
- where the debt arises (e.g. rent relating to a written tenancy agreement)
- details of how the debt can be paid (e.g. the method of and an address for payment)
- if regular instalments have been offered (or are being paid) an explanation why that offer or payments is not acceptable
- the address for the Reply Form to be sent
A suitable template is available here and you will also need the SFS data entry form available here. You must ensure you check the protocol (linked above) that everything has been put in the letter because it’s designed to be used by landlords who have followed our guidance and used our written tenancy agreements. The template is suitable for tenants or guarantors. The template includes the Information Sheet and Reply Form.
What to Enclose With the Letter
The letter must have enclosed with it an up to date statement of account which includes other charges and interest (if any). This would typically be the rent schedule from the tenancy but it may also include details of works completed including invoices if there was damage to the property being claimed for example.
In addition, the letter must have enclosed the Information Sheet and Reply form found in Annex 1 of the protocol.
Finally, the letter must also enclose a Financial Statement form (linked above and we are members of the Standard Financial Statement and have permission to re-produce for our subscribers).
Note: We have found in the past that in addition to doing the Letter of Claim, you could also at the same time do all the court forms and paperwork together and enclose everything as one bundle. Most people see pre-action letters and ignore them because they don’t think you will get on with actually going to court. If you can show that you have done all the paperwork and the forms are literally ready to post, this has a significant impact on they way they think.
Other Requirements of the Letter Before Claim
The letter must be dated toward the top of the first page.
The letter must be posted (on the same date it is dated). In addition to posting, it may be emailed if the creditor knows an email address.
In our view, the letter should be posted using ordinary post and obtain a proof of postage from the post office. A signed for service is not normally suitable because the recipient may not sign for it.
Response by the Debtor
The debtor should reply using the form that was enclosed with the Letter of Claim.
Where a debtor indicates in the Reply Form that they require time to pay, the creditor and debtor should try to reach agreement for the debt to be paid by instalments, based on the debtor’s income and expenditure. In trying to agree affordable sums for repayment, the creditor should have regard where appropriate to the provisions of the Standard Financial Statement or equivalent guidance. If the creditor does not agree to a debtor’s proposal for repayment of the debt, they should give the debtor reasons in writing.
A partially completed Reply Form should be taken as an attempt by the debtor to engage with the matter and contact should be attempted seeking any further information needed.
Attempts to Resolve Without Court Action
If the parties still cannot agree about the existence, enforceability, amount or any other aspect of the debt, they should both take appropriate steps to resolve the dispute without starting court proceedings and, in particular, should consider the use of an appropriate form of Alternative Dispute Resolution (ADR).
Where the procedures have not resolved the matter between the debtor and creditor, they should undertake a review of their respective positions to see if proceedings can be avoided and, at the least, to narrow the issues between them.
Commencing Proceedings Following the Letter of Claim
If there is no reply to the Letter of Claim within 30 days of the date at the top of the letter, proceedings may be commenced.
If the debtor has replied to the Letter of Claim but agreement has not been reached, the creditor should give at least 14 days notice of their intention to start court proceedings unless there are exceptional circumstances (such as a limitation period expiring soon).
If the debtor indicates that they are seeking debt advice, the creditor must allow the debtor a reasonable period for the advice to be obtained. In any event, the creditor should not start court proceedings less than 30 days from receipt of the completed Reply Form or 30 days from the creditor providing any documents requested by the debtor, whichever is the later. If the debtor indicates in the Reply Form that they are seeking debt advice that cannot be obtained within 30 days of their reply, the debtor must provide details to the creditor as specified in the Reply Form. The creditor should allow reasonable extra time for the debtor to obtain that advice where it would be reasonable to do so in the circumstances.
Complying With the Protocol and Penalty for Failure
If a matter proceeds to litigation, the court will expect the parties to have complied with the Protocol. The court will take into account non-compliance when giving directions for the management of proceedings. The court will consider whether all parties have complied in substance with the terms of the Protocol and is not likely to be concerned with minor or technical infringements, especially when the matter is urgent.