New rules on enforcement by taking control of goods: 7 things you need to know

New rules on enforcement by taking control of goods: 7 things you need to know

The 6 April 2014 saw new rules come into force replacing the existing enforcement of judgment debt processes with a new procedure, including elements specific to the recovery of commercial rent arrears (CRAR).

The changes are particularly key  in introducing a new procedure of taking control of goods (TCG) to enforce (recover)  a judgment debt and consequential amendment to the regulation and fee structure for enforcement agents who carry out the work.

The details of the provisions, including a new fee structure, are contained in The Taking Control of Goods Regulations 2013, SI 2013/1894 and The Taking Control of Goods (Fees) Regulations 2014, SI 2014/1.

New parts to the CPR (CPR 83, CPR 84, CPR 85 and CPR 86) to deal with applying for a writ or warrant of control and seeking to challenge action by an enforcement agent were also introduced on 6 April 2014.

These changes mean that there is plenty for practitioners to take on board and a review of the new provisions raises the issue of a slightly bumpy ride ahead as the new regime beds down

What is the key issue for solicitors to be aware of?

1. Advance notice is now required

The single most significant factor arising from the new regime is that as of 6 April 2014, any attempt to take control of goods (whether to satisfy a judgment debt and/or in pursuance of CRAR) has to be preceded by the giving of advance notice to the judgment debtor/non-paying commercial tenant.

Under the existing provisions, much of the bailiff or enforcement agent's effectiveness was, in part, due to the surprise nature of their visit on the unsuspecting judgment debtor; leaving them no opportunity to remove and secret away goods that might otherwise be seized

As of 6 April 2014 that surprise element will be removed and enforcement agents will be required to give the judgment debtor/tenant seven clear days' notice that they will be attending the property with the intention of taking control of goods.

What other things do you need to be aware of?

It is not all bad news and there are some more positive sides to the new provisions to be aware of. As of 6 April 2014:

2. Sundays now count as a day of the week

Attending to take control of goods can be carried out on any day of the week, including Sundays

3. 'Tools of the Trade' now subject to a financial limit

The old 'get out' for the sole trader that goods could not be seized because they were his 'tools of the trade' is now subject to a financial limit. Only 'tools of the trade' up to a maximum amount of £1,350 are exempt. So, if the enforcement agent finds goods in excess of that value, these can be seized

4. Fixed fees now apply

High Court Enforcement Officers used to charge a fee based on their recovery; this has now been removed and fixed fees are being introduced for enforcement agents for the different stages in the taking control of goods process

What, if any, action should you be taking now?

Clearly, where you have any judgments/unpaid rent outstanding then an urgent review of the file should be undertaken with a view to considering what enforcement action might be taken and when. Other things to consider include:

5. Transitional provisions may apply

The transitional provisions which come into force on 6 April 2014 are contained in the Tribunals, Courts and Enforcement Act 2007 (Consequential, Transitional and Saving Provision) Order 2014 (the 'Transitional Provisions') and are to be read alongside TCEA 2007, s 66.

TCEA 2007, s 66 provides that where:

  1. goods have already been distrained;
  2. goods have already been executed against; or
  3. goods have already been made subject to a walking possession agreement

then the new sch 12 TCG regime will not apply to that execution process. It would appear therefore that all execution matters concerning such an enforcement will continue under the old regime. However, the execution process must have reached any of the above three stages for this to be the case.

In all other cases, the new sch 12 TCG regime will apply regardless of when the writ or warrant commencing the enforcement process was issued.

If you do have writs of fieri facias and warrants of execution already issued then be aware that if any of the above stages have not been achieved by 6 April 2014 then the new TCG sch 12 regime will apply to the remainder of the enforcement process; with a slight adjustment as regards the fees payable depending on what stage of the enforcement process has been reached by 6 April 2014, as set out in the Transitional Provisions, reg 4.

Also be aware that amongst the amending provisions of the Transitional Provisions is an amendment to The High Court Enforcement Officers Regulations 2004, SI 2004/400, to the effect that where the enforcement agent uses the TCG sch 12 procedure but fails to recover sufficient by way of sale proceeds to cover the enforcement agent's compliance fee (per The Taking Control of Goods (Fees) Regulations 2014, SI 2014/1, reg 4) then the judgment creditor will be responsible to pay that fee or any unpaid balance of it.

6. Your client may need updating re the new provisions

Where existing writs or warrants are to become subject to the new TCG sch 12 regime, you may need to consider updating your client as to the impact of the new provisions, particularly as regards the new fee structures involved and, eg, the new financial limit as regards the exemption for 'tools of the trade'

7. Are you acting for a Landlord entering into a new lease?

There is suggested advice for landlords entering into new leases are regards identifying what is commercial property and separating out items such as service charge from rent, given the limitations as regards the premises and arrears for which the CRAR regime can be used.

Are there going to be any bumps along the way as the new regime beds down?

Most probably. The key areas where uncertainty currently prevails at present are:

1. How exactly the limited exemption will work in practice?

If the limit is £1,350 what happens if the only asset to be seized is the sole trader's van which has a value of (say) £5,000? Can the enforcement agent take control of it? Yes, it would seem so but we can foresee the potential for some dispute/satellite litigation as to what exactly should happen in this scenario and whether, when and how the £1,350 might be repaid to the judgment debtor?

2. Fees

The new fee structure will take time to settle down. High Court Enforcement Officer's previously worked on the basis of charging a percentage of what they recovered for the judgment creditor plus/or a small 'abort fee' if they made a nil recovery. There is now a fixed £75 fee to cover the initial instruction and serving of the notice on the judgment debtor. After that, there are staged fixed fees for the initial attendance and further stages along the way. It remains to be seen how effective enforcement agents will be at those early stages and how many find they run instead to success only being achieved in the later stages (when the fixed fees markedly increase).

This article was first published on  Lexis®PSL Dispute Resolution on 4 April 2014. Click  here for a free trial.

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About the author:
Ruth specialises in general corporate and commercial dispute resolution with particular experience in shareholder disputes, fraud and warranty claims. Ruth trained and qualified at Berwin Leighton Paisner LLP (now Bryan Cave Leighton Paisner LLP) where she remained in practice for ten years. Her work has involved project managing large-scale cases to trial in the chancery and commercial courts. Ruth was actively involved in in-house training with a particular focus on all aspects of evidence gathering and production, including authoring a user-manual on E-disclosure. She is also a contributor to the New Law Journal.