July 2008 - Zero tolerance approach to bad debt

Things aren’t looking good. We hear on the news every day about the credit crunch, rising inflation and economic growth stalling. Most commentators are saying that things will get worse and stay bad for some time before they get better.

All this will inevitably mean that pressure will be put on cash flow. Your clients will be slower to pay (because of their own cash-flow problems), more bad debts are likely to occur and the bank is likely to be less happy about extending your overdraft.

We are finding that the economic downturn is even causing conflict between different departments in our clients’ businesses. Sales teams are finding it harder to get orders and so want to relax procedures, maybe by offering longer credit terms or undertaking less stringent checks on credit worthiness. Finance departments, on the other hand, are trying to tighten up credit control procedures and reduce the amount of overall credit given and exposure to the risk of bad debts generally.

It’s never good to have a business pulling in two directions and so it is important to make decisions on credit control policy in an open and balanced way.

Obviously, just how strict you are with credit control is a business decision and needs to be balanced with your need for sales, but now is the time (before things get worse) to review your credit control procedures - before you end up with problems.

Read the full article The zero tolerance approach to bad debt which outlines 7 crucial steps you can take to avoid bad debt and to tackle debt problems when they occur.

Our Dispute Management Solicitor, Gary Cousins, can help by working with you to set up an effective credit control procedure. We can draft your terms and conditions so that they maximise your chances of getting paid - in full and on time. We can advise on whether to take court proceedings and, if so, the best procedure to use and will then fight your corner in court to give you the best possible chance of making a full recovery of the debt. Book an initial free telephone appointment with Gary Cousins here or call 0121 778 3212.

A recent Court of Appeal decision has given the green light to banks to repossess properties owned by the innocent victims of property fraud.

In Barclays Bank v Guy a fraudster executed a transfer of Mr Guy's property to himself and successfully had the transfer registered at the Land Registry so that he became the registered proprietor of the property. He then borrowed money from Barclays Bank and secured the loan with a mortgage against Mr. Guy's property.

Upon becoming aware of the fraud, Mr. Guy applied to the Court of Appeal to rectify the fraudulent transaction and have himself reinstated as the owner of the property and the mortgage in favour of Barclays removed.

The Court of Appeal determined that it was possible to reinstate Mr. Guy as the registered proprietor of the property but the mortgage to Barclays would remain. This meant that Barclays still had a valid power to sell the property for non payment of its loan even though Mr. Guy was not the person who had borrowed the money

This is a staggering decision which effectively means any of us could find our property being repossessed because of the actions of a fraudster. Anyone owning property they do not live in themselves is particularly vulnerable to this type of fraud.

It is possible to protect yourself against this type of fraud by completing a simple form and lodging it at the Land Registry. If you are worried about the implications of this case then please feel free to contact Steve Petty for further advice.

You are renting commercial premises; business is tough; you want to move to smaller (or just plain cheaper) premises to cut costs. You dust off that lease you signed a couple of years ago to find there are another 8 years to run. What can you do?

This is a question that we’re expecting to be asked a lot this year as businesses attempt to tighten their belts.

Many tenants sign up to 5, 6 or 10 year leases without giving a moment's thought to the enormity of the financial commitment they are making. One of the things we always point out to tenants entering into a new lease is the total financial commitment they are making. For example, a 5 year lease at £20,000 per annum is a total commitment of £100,000. It's amazing how few business people think of it in those terms.

In addition to the rental costs, there are the costs of keeping the premises in good repair which for an older building can be absolutely astronomical.

If you find yourself staring down the barrel of several more years' rent on premises you don't want with a nasty repair bill for the premises as the sting in the tail, there are a few strategies you can adopt to try and soften the blow. Read about these strategies on our website in I’m a Tenant Get Me Out of Here.

Plain English legal advice from Steve Petty of Cousins Business Law - you can reach Steve on 01926 629 005.

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