Taking control of sundry debt

With the unprecedented and sustained budgetary cuts in local government over the last decade, local authorities simply cannot afford to be anything other than efficient and on the ball when it comes to debt recovery, regardless of the type of debt.

In terms of sundry debt, there are several recovery options available once judgment has been awarded, the choice depending on circumstances such as the debtor’s financial status, potential assets and the size of the debt.

Charging orders, third party debt orders and attachment of earnings orders (individual only) are recovery options, as is enforcement. Enforcement may be used to recover moneys owed by both private individuals, sole traders, and businesses.

In the case of an individual debtor, the local authority will need to follow the debt pre-action protocol that was introduced in October 2017, before taking the matter to court to obtain judgment.

Where the debt is for £600 or more – and this sum can include court costs – enforcement can be via a High Court Enforcement Officer (HCEO) under a writ of control, which can often be the most effective option for the recovery of sundry debt.

The judgment is transferred to the High Court for enforcement purposes – leave is not required – and a writ fee of £66 is payable to HMCTS. In most cases, the HCEO will undertake the transfer up at no charge. The writ is valid for 12 months and may be applied for on a judgment up to six years old.

The writ fee is recoverable from the debtor, along with judgment interest at 8% (calculated daily), court fees and enforcement fees, which are set by the Taking Control of Goods Regulations (Fees) 2014. If no money is recovered, all the local authority has to pay is the writ fee and the £75 + VAT compliance fee.

Once the writ has been issued, the HCEO will send notice of enforcement to the debtor, giving them seven clear days (excluding the day of despatch, Sundays and bank holidays) in which to pay in full to prevent any further enforcement action. This is called the compliance stage and the statutory fee is £75 + VAT.

If the debtor does not pay or wishes to enter into a payment arrangement, enforcement will progress to enforcement stage 1, which entails an attendance by an enforcement agent, acting under the authority of the HCEO. If payment is made in full at this stage, enforcement is complete. The fee for enforcement stage 1 is £190 plus 7.5% of the sums to be recovered over £1,000, both + VAT.

If a payment arrangement is set up, the enforcement agent will take control of the debtor’s goods, sufficient to cover the amount owed. Normally these goods are left on the premises for the debtor to continue to use under a “controlled goods agreement”. Under this agreement the goods remain in the control of the HCEO until the debt is fully satisfied, and the debtor may not sell or dispose of them. To do so is a criminal offence.

If the debtor still refuses to pay, or breaks a payment arrangement, the enforcement agent will reattend under enforcement stage 2. The fee for this stage is £495 + VAT.

The final stage is the sale or disposal stage, where the debtor’s goods are taken for sale, usually at public auction. The enforcement agent will normally estimate the auction value of the controlled goods, but will obtain specialist valuations where required. The debtor is sent seven clear days’ notice of the sale.

The fee for the sale or disposal stage is £525 plus 7.5% of the sums to be recovered over £1,000, both + VAT.

Any surplus after the sale will be returned to the debtor. If the full sum is not recovered from the debtor, whether by payment or sale of goods, the compliance fee and auctioneer’s fee (if relevant) are paid first, and the balance divided proportionally between the HCEO and the local authority.

One final consideration with any form of debt recovery is dealing with vulnerable debtors. There is clear direction in the Taking Control of Goods regulations 2013, but we would suggest that HCEOs should go beyond this, so we have set up welfare teams and trained all our office and field teams on vulnerability and mental health.

Our training provision – available to all local authorities via one of our Group companies, Excel Civil Enforcement - comprises level 2 and level 3 courses, as well as workshops. We are the only enforcement agency which is an approved (educational) assessment centre delivering Regulated Qualifications and Quality Mark training and is also a CILEx approved assessment centre.

If you would like to learn more, please take a look at our complimentary eBook.