FAQs – CREDITOR TAKING CONTROL OF A DEBTOR’S GOODS - GENERAL
These FAQs are to assist official receivers in understanding the subject and should be read in conjunction with the more detailed guidance given in the main body of the Technical Manual chapter. Links to the relevant parts of the Technical Manual are given within the FAQs.
In what circumstances can a creditor take a debtor’s goods?
There are three main routes by which a creditor can seek to take a debtor’s goods to recover a sum of money. These are following the obtaining of a court judgment, following the obtaining of a liability order (by organisations such as the Child Support Agency or local authorities) or where rent is outstanding. HMRC also have an ability to take goods where sums are outstanding (see paragraph 9.24).
A landlord’s ability to take goods – isn’t that called distraint?
It was called distraint, the act of recovery being known as the levying of distress. This ancient right was repealed on 6 April 2014 and replaced by a more regulated and limited process called taking control of goods (see paragraph 9.6).
When can a landlord take control of goods?
A landlord may take control of goods by following a process known as Commercial Rent Arrears Recovery (‘CRAR’). As the name suggests, the process is open only to landlords of commercial premises and can only be used to recover rent. Additionally, there must be a lease in place. In all other circumstances it will be necessary for the landlord to obtain a court judgment to recover outstanding rent (see paragraph 9.22).
How does the obtaining of a judgment lead to the ability to take control of goods?
A judgment is a decision of a court that one person is liable to pay another person a sum of money. If that person does not pay over the sum, the court can issue a warrant, or writ of control, which allows the judgment creditor to appoint a person to recover the sum due by following the taking control of goods process (see paragraphs 9.12 to 9.20).
Can any person be appointed to take control of goods?
No. The person appointed must be an ‘enforcement agent’. To be an enforcement agent you must qualify and obtain a certificate to act from the County Court. Court employees (such as County Court, but not private, bailiffs), officers of HMRC and constables automatically qualify to act as enforcement agents (see paragraphs 9.10 to 9.11).
Can the enforcement agent just go and take goods to recover the debt, once appointed?
The enforcement agent must give the debtor seven days notice that he intends to take control of goods (see paragraph 9.32). There are also strict rules governing the times of day that premises can be entered and goods taken, which goods can be taken and the circumstances in which they can be taken (see Part 3).
Won’t the debtor just get rid of the goods to another person to protect them from being taken control of?
When the court issues a warrant or writ, the goods of the debtor are bound and any transfer or assignment that was carried out in the knowledge of the warrant or writ will be void. In cases where a warrant or writ is not required (for example, to enforce under a CRAR) the goods are bound from the date of the delivery of the notice of intention to take control of goods (see paragraph 9.28).
The court can also order a shorter notice period where there is a risk that the goods will be removed from the debtor’s premises (see paragraph 9.32).
What restrictions are there on the enforcement agent’s ability to take goods?
The enforcement agent may generally only enter the premises of the debtor after 6am and before 9pm, but on any day of the week (see paragraph 9.38). The agent may enter only via a normal means of entry (see paragraph 9.37) and may not enter or take goods where only a child or other vulnerable person is present (see paragraph 9.42). The agent may use reasonable force to gain entry, but not against a person. There are also exempt goods provisions (see paragraph 9.30).
What goods are exempt from being taken control of?
Generally speaking, exempt goods are those that the debtor uses personally in his/her employment (including study) up to £1,350, goods that meet a domestic need and a vehicle displaying a valid disabled badge (see paragraph 9.30).
What does the enforcement agent do once he/she has taken control of the goods?
The enforcement agent may take the goods to storage, or may make them secure in the premises in which they were located (see paragraphs 9.52 to 9.54). The next step is to arrange for the sale of the goods.
Is there anything that the debtor can do to avoid the goods being taken control of and sold?
The debtor may enter into what is known as a ‘controlled goods agreement’ which allows him/her to retain the goods against an agreement that monies will be provided (in lump or instalments) in repayment of the debt due. The agreement is forfeit if the monies are not paid (see paragraph 9.51).
How is the sale of the goods conducted?
The enforcement agent must give the debtor seven days’ notice that he/she intends to sell the goods. This gives the debtor one last chance to pay the sum due to avoid the goods being sold. The sale must be by public auction unless the court orders otherwise, and must be conducted by a qualified auctioneer. The goods may be auctioned on-line, at the auctioneers or at the premises of the debtor (see paragraphs 9.61 to 9.64).
What happens to the proceeds of sale?
The proceeds of sale must be applied to the repayment of the sum due, plus fees. The fees that may be charged are set out in the legislation. If there is a joint-owner, his/her proportional interest must first be paid out of the proceeds of sale (see paragraph 9.65).