If a judgement has been made in favour of the freeholder and there has still been no payment it then becomes necessary to enforce the judgement through one of the courts, the principle enforcement methods being as follows:
1: WARRANT OF EXECUTION
When a Warrant of Execution is submitted to the court they will then instruct Bailiffs to visit the property. Where the property is a leasehold flat then the bailiffs will send a report to the freeholder or the managing agent, advising on how many times they visit and what happens, such as who’s at home (or not). It may be possible that the leaseholder has assets that could be siezed to pay the debt but this could only work if the assets were owned outright, not on any credit agreement. They will also advise any sub-tenant they speak to, to contact their landlord to inform them they have had a bailiff visit. The bailiffs will not at this stage force entry and will report that the property is a rental. This is when the freeholder/managing agent will be able to proceed with a third party order to clear the arrears direct from the tenants rent or the landlords bank account. The latter however may not work if there is no sufficient credit in the account.
At present if there is a debt of more than £5,000 (which was increased from £750.00 as of 1st October 2015) the lessee can be petitioned for bankruptcy. The difficultly with bankruptcy is that you will be required to personally serve a Statutory Demand on the lessee before issuing a Bankruptcy Petition. The Bankruptcy Petition will also need personally serving.
If a Bankruptcy Order is made a Trustee in Bankruptcy will be appointed who will then deal with the assets and liabilities of the bankrupt lessee and make payments, (assuming there are funds in the bankruptcy estate), to creditors in a particular order. As the Petitioning Creditor, whilst some costs may be recovered, debts are paid off in in priority to other creditors so the main element of the debt will rank lower down the order as an unsecured creditor. This is a very heavy handed option and it comes with a high level of costs and risk. There is always the risk that whilst time and money will be undoubtedly spent petitioning for the lessee’s bankruptcy if there are no funds to pay anyone, or if there are funds available, they may well not be enough to pay the unsecured creditors.
3: Attachment of Earnings Order
An employed debtor could have regular payments deducted from his salary to pay the debt.
4: Charging Orders
This is the option we chose to proceed after a judgement was made in our favour from the court. We sent it to his lender and when we did not get any response we got an interim charging order registered against the property. This remains on the title until the property is dealt with by way of a sale, re-mortgage or similar.
Having said that though, the arrears are accruing again so we are now considering what to do next.
Ensuring that such costs only fall on the defaulting leaseholder is not always possible to fully achieve, particularly if the lease is not clear on whether the costs can be taken from the service charge account. This may certainly apply to older leases as newer leases are likely to contain express covenants that allow the freeholder to recover a range of legal expenses.
There is also the consideration of whether the leaseholder chooses to defend the action, which will increase the costs considerably.
So, the next step has to be that of commencing forfeiture which is the taking back of the lease (and therefore the property) by the freeholder and which can be read about here.