Taking control of goods

The Taking Control of Goods Regulations, part of the Tribunals, Courts and Enforcement Act 2007, came into effect on 6th April 2014.  The aim of these regulations was to bring conformity and clarity to the various forms of enforcement.

The main changes to the existing law were:

• The enforcement process is now set out in four stages, each with defined fees.
• The first stage, the compliance stage, requires that High Court Enforcement Officers (HCEOs) must serve a Notice of Enforcement, giving the debtor 14 clear days to pay in full.
• Tools of the trade are only exempt to a maximum value of £1,350.
• Vehicles must be immobilised for two hours before they can be removed.
• The debtor must be given seven days’ notice of a sale (this is an increase from four days).
• The abortive fee, payable by the creditor when enforcement is unsuccessful, is renamed the Compliance fee and is triggered each time a Notice of Enforcement is served.
• Distress for rent is replaced by Commercial Rent Arrears Recovery (CRAR) for commercial landlords whose tenants are in arrears. CRAR only applies to rent and there must be a written lease in place.

Four Stages of Enforcement

The new process of enforcement has made it very easy for debtors and creditors alike to easily follow the HCEOs actions, and also to calculate the costs.

The prospect of ever increasing costs is a good way to push debtors in the right direction, and very few cases now require HCEOs to progress to the fourth stage (see below regarding “Selling the Goods”).

Notice of Enforcement

This is perhaps the most controversial area of the reform, with arguments for and against both sides.  From the creditors’ point of view, this gives the debtor the opportunity to take goods and hide them.  

Debtors have been reported to hide goods, and have even gone so far as to hide trades’ vehicles from the HCEOs. On the other hand, sending the debtor a notice in good time will give them a last opportunity to pay, without incurring the full Sheriff’s fee (only the Compliance fee would be payable at this stage).

Tools of the Trade

Tools of the trade were made exempt up to the value of £1,350. These include things that are needed by the debtor to do their job/run their business, for example, tools, books and vehicles. The value limit means that small outfits are not forced out of business by creditors taking all available items. On the other hand, the creditor will still have the opportunity to make a recovery from larger, more expensive items, or smaller items that bring the grand total above this limit.

Immobilisation of Vehicles/Notice of Sale

Vehicles are immobilised for a period of 2 hours after which they can be seized (if the debtor hands over the keys initially, then there is no need for the 2 hour immobilisation period). After goods have been seized and are “controlled goods”, the debtor is given 7 days’ notice prior to their sale. These additions again give the debtor a final opportunity to pay off their debt, rather than losing their vehicle/goods. This results in the creditor waiting a little longer than under the old rules, but ultimately it is more likely that they will make a full recovery as the controlled goods may not be as valuable as the debt itself.

In circumstances where the goods do not fulfil the debt, the HCEOs can return to the property to try and obtain further goods. A shorter notice period of 2 days is required for a return visit, and this can be shortened by the court if it is believed that the debtor will try and dispose of goods in the interim.

Controlled Goods Agreement

Once the HCEOs have taken “control” of the goods, they need not physically take them then and there.  A Controlled Goods Agreement (CGA) is drawn up, stating that goods cannot be sold on and, if they are, the HCEOs can enforce the agreement on the purchaser (whether or not they know of the CGA). The HCEOs can then re-enter and take the goods at any time, and can use force if necessary.

It is a criminal offence for the debtor to intentionally interfere with goods taken into control. If found guilty, the debtor can be sentenced to a prison sentence of up to 51 weeks month and/or a Level 4 fine (currently £2,500). They may also be subject to contempt of court proceedings if they are found to be removing, hiding or selling the goods taken into control.

Selling the Goods

Once seized and the relevant notice periods have expired, goods will be sold at auction.  It is important to note that, in reality, very few cases ever require the seizure of goods (less than 1% of cases in 2014 – 2015 resulted in the removal of goods).  Therefore it appears that by going through the initial stages, debtors are prompted to make payment.

If you do require any legal assistance in obtaining a money judgment or enforcement, please contact Brian Kirby on 023 8071 7421 or briankirby@warnergoodman.co.uk.

Relevant legislation

• Part 3 of the Tribunals, Courts & Enforcement Act 2007
• Taking Control of Goods Regulations 2013
• Taking Control of Goods (Fees) Regulations 2014
• Certification of Enforcement Agents Regulations 2014
• The Tribunals, Courts and Enforcement Act 2007 (Consequential, Transitional and Saving Provision) Order 2014
• The Civil Procedure (Amendment) Rules 2014 No 407