PART 2
April 2014
POWER OF CREDITOR TO TAKE CONTROL OF A DEBTOR’S GOODS
9.6 Creditor taking control of goods – general
From 6 April 2014, the ability of a creditor to seek recovery of debts through the removal and sale of property of the debtor, whether after obtaining a court order or through common-law or statutory rights not involving the courts, has been formalised in statute, bringing into force a tightly regulated process. This process is known as ‘taking control of goods’ [note 1] [note 2] [note 3].
The legislation prescribes the entire process to be followed from the serving of a notice (see paragraph 9.32), to the taking control of the goods (see paragraphs 9.45 to 9.50), powers of entry (see paragraphs 9.35 to 9.44), goods which may be seized (see paragraph 9.30), care of goods seized (see paragraph 9.58), the sale of goods seized (see paragraphs 9.61 to 9.64) and the distribution of the sale proceeds (see paragraph 9.65).
Where, before 6 April 2014, goods have been distrained upon or executed against, or made subject to a walking possession agreement, under a power existing at that time, the rules in force at that time may still be followed. The rules so far as they impact on insolvency matters (see Part 4) remain largely the same as the pre-April 2014 position, though official receivers may consult Technical Section in cases of difficulty. It is considered that most transitional matters would have been completed by the middle of 2014.
9.8 Taking control of goods – general
The process for taking control of goods applies where an enactment, writ or warrant confers power to take control of goods and sell them to recover a sum of money [note 4]. It also applies in respect of a ‘Commercial Rent Arrears Recovery’ (‘CRAR’) (see paragraph 9.22). In summary, the process is one that allows a creditor to take control of the goods of a debtor and sell them to recover a sum of money, but also has in place protections of the rights of the debtor. Where such a power to take control of and sell goods exists it may only be put into force by following the procedure in the legislation.
9.9 Remedy of distress repealed
The coming into force of the statutory process for the removal and sale of property of a defaulting debtor outlined in paragraph 9.6 meant that the common-law remedy of distress was repealed [note 5].
The power of a landlord to take goods from a defaulting tenant without first going to court has instead been formalised in statute in a process known as ‘Commercial Rent Arrears Recovery’ (‘CRAR’) (see paragraph 9.22) [note 6] and is only available to landlords of commercial premises.
Similarly, the statutory right of certain other organisations to levy distress has been replaced by the right to take control of goods (see paragraphs 9.22 to 9.24).
See Part 6 for guidance when dealing with a landlord taking control of goods under a CRAR.
9.10 Taking control of goods – use of enforcement agents
One of the key features of the taking control of goods legislation is that the process may only be carried out by certified ‘enforcement agents’ (see paragraph 9.11), whose power to act can be withdrawn where it is shown that they are in breach of the rules governing the process [note 7] [note 8] [note 9].
An individual may not act as an enforcement agent unless he/she [note 10];
It is necessary for a judgment creditor, following the obtaining of a writ of control (see paragraph 9.13) or warrant of control (see paragraph 9.14), to follow the taking control of goods process set by the legislation.
See Part 5 for guidance when dealing with a creditor taking control of goods in execution of a judgment.
9.13 High Court writs of control
Where a creditor has obtained a judgment for a debt of more than £600 [note 11] and the debtor has not satisfied the judgment, the creditor may apply to the High Court for a writ of control to take control of goods.
If the debt is more than £5,000 [note 12], the creditor is obliged to apply to the High Court, apart from in relation to an agreement under the Consumer Credit Act 1974 (see paragraph 9.14).
See paragraph 9.18 for guidance on the execution of a writ.
9.14 County Court warrants of control
If a judgment debt (or agreed instalments in the judgment) has not been paid, the creditor may apply to the county court for a warrant of control to take control of goods. A County Court warrant of control may be issued for a debt up to £5,000 [note 13].
For a debt between £600 and £5,000, the creditor has the choice of issuing a warrant in the County Court or in the High Court (see paragraph 9.13). The enforcement of an agreement under the Consumer Credit Act 1974 may however only be enforced in the County Court. Where the debt is below £600, the creditor is obliged to apply to the County Court [note 14].
See paragraph 9.19 for guidance on the execution of a warrant.
9.15 Time limits relating to writs and warrants of control
A creditor can apply for a writ of control (see paragraph 9.13) or a warrant of control (see paragraph 9.14) at any time up to six years after the date of the judgment [note 15].
Writs and warrants last for 12 months but can be renewed if application is made before the expiry of the original writ/warrant [note 16].
9.16 Geographical extent of writs and warrants
The officer or bailiff charged with executing the writ of control (see paragraph 9.13) or warrant of control (see paragraph 9.14) can take control of goods anywhere within the district or county to which the writ or warrant relates, subject to the general rules regarding the taking control of goods process (see Part 2).
A creditor may obtain writs or warrants in more than one district or county if it is believed that the debtor has goods in more than one district or county.
The court has the power to stay the execution of a writ or warrant for such time and on such terms as it thinks fit [note 17] [note 18].
9.18 Appointment of an enforcement officer to execute a High Court writ
England and Wales is divided into districts for the purpose of the execution of High Court writs, and at least one enforcement officer (HCEO) is assigned to each district. An enforcement officer who is appointed to the district to which the writ relates will be appointed to execute the writ of control. HCEOs also have discretion to accept writs for anywhere in England and Wales, but may decline to accept a writ if it is for an area to which he/she is not assigned. Judgment creditors are able to request that a particular HCEO acts in execution of a writ, otherwise writs are allocated for execution on a rota basis [note 19].
An HCEO is not a court employee and will therefore have to qualify as an enforcement agent (see paragraph 9.10) in order to act in relation to writs of control.
Further information regarding HCEOs can be found on this website – www.hceoa.org.uk
9.19 The execution of a warrant of control – County Court bailiff
A warrant of control is dealt with by a County Court bailiff, who is a salaried court employee and, as such, is considered to be a qualified enforcement agent for the purposes of the legislation (see paragraph 9.11), giving them the ability to take control of goods.
The warrant gives the bailiff the power to take control of goods, and he/she is obliged to deal with the warrant as soon as possible. The bailiff is liable for damages to the creditor if he/she, by reason of neglect, connivance or omission, loses the opportunity of executing the warrant [note 20].
9.20 Private (certified) bailiffs
Private bailiffs are either self-employed or employed by commercial firms. They often carry out enforcement for:
Private bailiffs generally need to be certified by a County Court to carry out enforcement activity of this sort. Similarly, they are required to qualify as enforcement agents (see paragraph 9.10) to carry out the taking control of goods procedure.
9.21 Taking control of goods by magistrates’ court
Where there is a default in paying a sum adjudged to be paid by a conviction or order of a magistrates’ court, the court may issue a warrant of control allowing the taking control of goods process to be instigated [note 21]. Generally, such warrants are enforced by private bailiffs (see paragraph 9.20) but may be enforced by a magistrates’ court bailiff.
9.22 Commercial Rent Arrears Recovery (‘CRAR’)
The process by which a landlord of commercial premises can seek to recover rent arrears is by following the ‘taking control of goods’ process (see Part 3). The process, when used by a landlord to recover arrears in this way, is known as Commercial Rent Arrears Recovery (‘CRAR’) [note 22].
A CRAR can only be used in relation to a property that is wholly commercial [note 23]. There must be a lease and the recovery can be only for ‘pure’ rent, due and payable, including interest and tax on interest but not to include, for example, council tax, service charges or utilities charged under the lease, or uncertain amounts [note 24] [note 25] [note 26]. In this context, ‘landlord’ can generally be taken to mean the person, in relation to a lease, entitled to the immediate reversion in the property comprised in the lease, or a mortgagee in possession [note 27].
A CRAR can only be carried out by an enforcement agent (see paragraph 9.10) appointed by the landlord.
Otherwise, it will be necessary for the landlord to obtain a judgment before instigating the taking control of goods process.
Where a landlord has the right to use CRAR against the immediate tenant, the right exists to instead serve a notice on any sub-tenant requiring that sub-tenant to pay rent due directly enforcement agent under the CRAR, instead of paying it to his/her own landlord in the usual way. This arrangement will continue until the sub-tenant ceases to be liable for rent or the arrears are paid off [note 28].
For as long as the notice has effect, the superior landlord has the right to recover from the sub-tenant the amount due by the use of a CRAR [note 29].
9.24 Taking control of goods by HMRC
HMRC have the power to instigate the taking control of goods process without a prior court order [note 30] [note 31].
Officials of that department are considered to be enforcement agents for the purposes of the legislation (see paragraph 9.11), meaning that a private bailiff need not be appointed to carry out the process, but may be so appointed.
9.25 Taking control of goods by the Child Support Agency
The Child Support Agency can, after obtaining a liability order (which is an order given by a Magistrates’ Court that the debt be repaid), use the power to take control of goods, engaging an enforcement agent (see paragraph 9.10), to the extent that the liability order remains unpaid [note 32]. Generally, such warrants are enforced by private bailiffs (see paragraph 9.20)
9.26 Taking control of goods by local authorities
A local authority can, after obtaining a liability order (which is an order given by a Magistrates’ Court that the debt be repaid), use the power to take control of goods, engaging an enforcement agent (see paragraph 9.10), to the extent that the liability order remains unpaid [note 33]. Generally, such warrants are enforced by private bailiffs (see paragraph 9.20).
[Back to Part 1 – Creditor action against the insolvent and the property of the insolvent] [On to Part 3 – Creditor taking control of goods – process]