Mercian Law Limited

Pre-Litigation

LETTER BEFORE ACTION

When pursuing a debtor it is fundamental that an initial letter before action is sent out before any court proceedings are commenced.  The letter before action is a formal demand requesting your debtor to pay within 7, 14 or 21 days.  We guarantee that your letter before action will be sent out the same day your instructions and payment are received.

Many debtors pay upon receiving a solicitors letter before action, and this is all that is required to solve the problem.

We charge a fixed fee of £10 plus VAT.  At this cost it is cheaper than taking any further action yourself.

The success of your Letter Before Action will depend upon:

When we are instructed What credit control process you have initially used The financial position of the debtor

All we require from you is:

The debtors name The debtors address Copy invoice stating the amount claimed Copy of the terms of trading 

We will accept instructions by post, fax or e-mail. 

LATE PAYMENT OF INTEREST NOTICE

Are your customers paying late?  You may be able to claim compensation!

The late or non payment of commercial invoices is a major worry for most small and medium business’s.  The late payment interest notice is a pre litigation tool to assist in gaining prompt payment rather than that commencing court action.  Such notices are seen as a formal demand for payment and are considered good business practice.  The use of the notice is a justifiable way to maintain your profitability when your cash flow is not gaining bank interest or reducing your overdraft.

You can claim late payment interest and compensation if:

You have supplied goods and services Your customer bought for business purposes The contract is not a consumer credit agreement The contract doesn’t contain a clause for interest on overdue invoices

The Late Payment of Commercial Debts Regulations 2002 enables you to do the following, without amending your terms and conditions of business:

Charge interest for each day you invoice is overdue Charge compensation against your debtor at the rate stated below

Size of unpaid debt    Compensation

Up to £999.99             £40

£1000 to £9999.99    £70

£10000 +                     £100

The interest rate on smaller debts may seem insignificant, but on larger debts the interest payable will soon give the debtor incentive to pay you ASAP.

All you would need to do is serve the debtor with the amended invoice and we would then serve a Late Payment Interest Notice for a fixed fee of £10 plus vat.  The original invoice VAT is to be included in the interest calculation, but no VAT is payable on the interest amount.

You can serve the debtor with an amended invoice including interest and compensation once the payment is overdue, and this would depend upon the nature of the agreement you have with the debtor.

If your agreement with the debtor stipulates an agreed payment date you will have to wait until the date has passed.

If no payment date was stipulated then there is a default payment date of 30 days from the date the goods are delivered or service performed.

You may have a long standing trade relationship with the creditor.  Where there is no payment period in the agreement but they usually pay at the end of the week, month or quarter etc.  In these circumstances interest and compensation cannot be demanded until 30 days after the usual payment date.  We advise that you should consider carefully your position before claiming interest and compensation as you don’t want to antagonise your existing customer relationship.

You should state on all written correspondence and verbally advise your customers of your right to charge interest and claim compensation if they fail to pay in accordance with the agreed terms.  The advised wording is as follows:

“We understand and will exercise our statutory right to claim interest and compensation for debt recovery costs under the late payment legislation if we are not paid according to the agreed terms.”

You have 6 years to pursue your debt.  The 6 years for claiming interest and compensation run from the date the interest became due.

When your debtor receives a demand for late payment interest and compensation they will look for any way of not paying it.  Therefore, you must ensure that your invoices are accurate, and deal with any complaint of faulty goods or late delivery.

Bear in mind that the demand for interest and compensation can sometimes delay the payment of the original debt.  Therefore if you require the debt to be paid quickly you may not want to aggravate the debtor further, a standard letter before action may be sufficient. 

Finally, if you are claiming interest, it will stop accruing once a cheque has been received not when it clears.  If the debtor is paying in part payments the interest is paid first then the debt.

Possession Notices

Mercian Law assists private residential landlords with the preparation and service of S8 & S21 Notices Seeking Possession.  The fees for this are £100 + VAT per Notice.

Click here for our fees