How can you recover factoring & common maintenance debts from owner-occupiers? A Notice of Potential Liability for Costs (NPLCs) can assist Registered Social Landlords and factors to recover money due by owner-occupiers for factoring and common maintenance debts.
Notice of Potential Liability for Costs
Introduced in 2004, the Notice can be used in relation to flats or houses. It does not solely relate to costs already incurred and can be lodged in relation to planned works where there is doubt regarding an owner’s ability to pay their share of the cost.
An NPLC is registered over a property – not against an individual. While it will not prevent an owner from selling their property, it is highly unlikely that a purchaser would buy the property with the Notice in place as they will then become liable for the debt. This usually forces the seller to pay the money that is owed before completing the sale. Once the debt is repaid, a Letter of Satisfaction is issued confirming this payment.
Lodging the Notice
To be able to lodge a Notice, you must be:-
- the owner of the property;
- the owner of another flat within the same tenement; or
- the factor or manager of the tenement or development.
No specific figures are required in the Notice as these are likely to fluctuate over time (whether payments are received or not), however, a list of the elements of debt must be given. Broad headings can be used to list the works which are covered by the NPLC such as common insurance premiums, factoring charges etc.
It is possible to lodge a Notice covering more than one property and each Notice is valid for 3 years before it automatically expires.
The Notice requires to be registered at least 14 days prior to the property being sold to make the purchaser liable for the debt, should the seller not clear his account.
While lodging a Notice does not guarantee an immediate payment, it proves very effective in almost all cases where a property is to be sold.
It should be remembered that lodging a Notice does not affect the law in relation to old debts. Generally, any debts which are more than 5 years old will not be recoverable however, there are exceptions to this. If any debts are approaching the 4/5 year mark then it may be more appropriate consider raising a court action for recovery.
If you would like to discuss Notice of Potential Liability for Costs or factoring & common maintenance debts in more detail, please contact our Factoring and Property Management team.