Property Litigation Claims and the Pre-Action Protocol for debt claims
The Pre-Action Protocol for debt claims came into force in October 2017. The purpose of the Protocol is to seek to avoid court proceedings wherever possible. It provides the debtor with all the information they need to make an informed decision, before responding with payment or issues of disagreement.
The Protocol applies to debt claims made by a business against an individual. As such, it applies to landlords recovering debts from a tenant, whether they are individuals or not, on the basis that it is likely they are to be considered to operate as a business, particularly in relation to commercial properties.
There are limited circumstances where the Protocol will not apply, for example, mortgage arrears or claims issued by HMRC.
As yet, it is not clear to what extent the courts will refer to the Protocol in respect of possession claims which include rent arrears. Landlords may argue that as the fundamental purpose of the claim is to obtain possession, rather than to recover a debt, the Protocol should not apply.
There is a risk of sanctions if the Protocol is not complied with when the court considers that it does apply.
The Protocol only affects debt claims. As such, it will not have any impact on other remedies available to landlords where there are arrears, such as forfeiture by peaceful re-entry.
Surprisingly, it does not appear to relate to Commercial Rent Arrears Recovery (the “CRAR”), presumably as there are no ‘proceedings’ in those cases.
It is likely that the Protocol will be seen to apply more to residential premises than commercial, but where a commercial lease is let to an individual, the Protocol should be followed.
As the Protocol is still relatively new, there is very little guidance on how the courts will approach any breach of it. The safest option is to comply with the Protocol to avoid any sanctions.
Do contact our Property Disputes team if you would like more information and support with this issue.
This update is for general purposes and guidance only and does not constitute legal or professional advice. You should seek legal advice before relying on its content. For advice, get in touch with your usual Greenwoods GRM contact or scroll down to complete our enquiry form.