DCPM PROCEDURE DEBT RECOVERY. The Dunedin Canmore Group supports equal opportunities for all: Insert hyperlink to Equality and Diversity Policy

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1 DCPM PROCEDURE DEBT RECOVERY The Dunedin Canmore Group supports equal opportunities for all: Insert hyperlink to Equality and Diversity Policy MONITORING FORM Department DCPM Departmental Director Susan Napier The procedure is applicable to New Horizons Property Services Procedure name Debt Recovery Procedure number DCPM-02 Original version approved by Angela Kirkwood Author (s) Yvonne Henderson Date of last review October 2012 Version number 4 Date of minor modification Date of next review October 2017 Internal/external consultees DCPM, Procedures, Debt Recovery 1

2 1.0 PURPOSE Dunedin Canmore Property Services (DCPM) recognises the necessity of ensuring that all owners settle their factoring invoices in full. This debt recovery procedure has been formulated to prevent debt accrual to ensure that prompt and effective action is taken to reduce debt and minimise unpaid invoices. This DCPM debt recovery procedure is designed to minimise the effect of bad debts on the business and will be subject to regular review. 2.0 AIMS AND OBJECTIVES DCPM aims to manage bad debt by: Establishing Preventive Measures Enforcing Action for the Recovery of Debt 2.1 Preventive Measures DCPM will adopt preventative measures and practices, which will assist in avoiding debts accruing: Using practical measures to prevent debt in the first instance: On appointment of a development, the New Business Officer will gather as much information about each private owner as possible - full name, contact details, principal home address and private bank details. This information will be kept centrally on the factoring database. All customers should be signed up to a management contract, which should be held within the development folder. It is beneficial for DCPM to seek and record the name of resident private tenants where a property is leased out. This is to assist in distinguishing between owner and private tenant and to ensure that debt recovery efforts are appropriately targeted. Ensure that information given to owners is accurate and clear in regard to their financial obligations. Owners must be made aware of their legal obligations through DCPM confirmation of appointment letter to all owners which must also include information on owner s rights to appeal the majority decision to appoint DCPM. 2.2 Management Contract Highlights Legal Obligation The customer's Management Contract sets out the owner's liability to meet their factoring charges in full and within the time period stated. DCPM, Procedures, Debt Recovery 2

3 It is DCPM s obligation to invoice owners, minimum of once per year (or as agreed in the management contract) highlighting all appropriate charges, recover the correct apportioned share and keep accurate records. If incorrect charges are invoiced a private owner may not be legally obliged to pay. It is imperative that DCPM invoices are accurate in regard to apportioning service and repair charges, vat and administration fees. Property Officers are responsible for quality checking all invoices to ensure 100% accuracy prior to issue. 2.3 Managing Bad Debt DCPM aims to utilise the appropriate form of Diligence, instructing the most suitable method of debt recovery as advised by our Solicitors. Options include: 1. Sheriff Officer s hand delivered letter requesting payment. 2. Arrestment/Inhibition: where we raise a decree, where options include Charge for Payment or Arrestment of Funds. 3. Take a decree were an Initial Writ is raised for those cases over 500 or a Statement of Claim for those cases under 500. Note: At present we are advised to carry out legal action to recover debt when the amount owed remains outstanding over 40 days. In addition, a sequestration can be used if the debt remains due over 50 days. 2.4 Enforcing Action for the Recovery of Debt Escalation procedure to recover debt: Stage 1 Stage 2 Stage 3 Stage 4 Issue of Invoice. DCPM team issue quarterly invoices by post to each individual customer at the end of each financial quarter. Issue of 1 st Reminder Letter. Admin Assistant issues 1 st reminder letter 14 days after issue of initial invoice, where balance is over 50. Issue of 2 nd Reminder Letter. Admin Assistant issues 2 nd reminder letter 28 days after issue of initial invoice. A 20+vat admin charge will apply 7 days post issue of the 2 nd reminder letter if no payment is received. Direct Contact At +40 days if no payment or contact made by owner DCPM team call and text the customer directly to request payment DCPM, Procedures, Debt Recovery 3

4 followed by original invoice sent via (where details are held on file). A final warning letter is also issued at this time detailing payment required within 10 days or legal action will commence. Stage 5 N.B. At +50 days DCPM commences further investigation & evaluates value of debt. Assess legal action options and refer identified cases to solicitors for court proceedings. Where we do not have the owner s full name and principal home address, a trace must be place on the owner. Late payment fees will be reviewed annually however all charges applied in relation to late payments will not be unreasonable or excessive. 2.5 Practical method of chasing debt via phone call: Ask owners if: Invoice and reminders received Any reason why bill not settled Obtain missing personal information from client 2.6 Recognising differing client groups It is the intention that all DCPM owners are tied to factoring through a signed management contract. It is recognised that the following exceptions exist: Clients who have signed DCPM Management Contract DCPM is in a strong legal position to pursue the debt by enforcing the Management contract. There is a high client awareness of obligations due to the sign up process. DCPM must ensure that all charges are correct and justifiable. Clients who have not signed DCPM Management Contract DCPM may have been appointed by one of two routes. Either DCHA has appointed a factor using its position as majority owner or a group of private owners has independently appointed DCPM under a clear majority. In this case, as there is no Management Contract to uphold in a court, DCPM will rely on utilising the Tenements (Scotland) Act 2004 if required to enforce debt recovery measures based on the legislations majority decision making process. Resolute non-payers If an owner/owners fail to pay their factoring fee, we shall pursue such individuals for payment in line with our 5 stage Debt Recovery process. Where we have taken all reasonable steps to recover unpaid charges from any homeowner who has not paid their share of the factoring costs DCPM, Procedures, Debt Recovery 4

5 delivered to the development, we shall be entitled to split the cost of the arrears across the development/stair in line with the development Deed of Conditions or as outlined in the Tenements (Scotland) Act Under exceptional circumstances where it is deemed not financially viable to continue to provide a factoring service to a stair/development due to exceptionally high levels of arrears, DCPM may temporarily withdraw their services including access to our 24/7 response for emergency repairs. 4.0 METHODS OF PAYMENT COLLECTION DCPM offers various payment methods which are convenient and costeffective for all customers. All clients are currently billed in arrears to include variable charges and fixed charges. However, DCPM reserve the right to review this at a later stage and alter to suit the operation of the business. Up to date information is provided on outstanding balances or credit from previous quarters are carried forward. Each invoice details the following payment methods: Direct Debits - All clients are actively encouraged to pay their factoring charges by monthly direct debit. Additional charges will apply for customers opting not to pay by direct debit. This charge is currently 12 per annum plus vat. Bacs Payment an option to settle their account bank by paying directly into our account is provided (Sort code , Account number , quoting your client account number as a reference). By Phone All clients are able to pay their invoice by card transaction over the phone with the DCPM team. By Cheque An option to settle their account by mailing cheque payable to Dunedin Canmore Enterprise Limited. 5.0 PUBLICISING/AVAILABILITY OF THE PROCEDURE The DCPM Debt Recovery procedure will be made available to our customers on request. 6.0 OTHER RELEVANT POLICIES AND PROCEDURES DCPM Payments Procedure DCPM Invoicing Procedure DCG Complaints Procedure Property Factors (Scotland) Act 2011 Code of conduct for Property Factors DCPM, Procedures, Debt Recovery 5

6 0 days Issue of quarterly invoice +14 days 1 st Reminder letter if non-payment after 14 days +28 days 2 nd Reminder letter if non-payment after 28 days +35 days Late payment fee plus VAT added after 35 days if non-payment +40 days Passed to Debt Recovery section after 40 days of non-payment +50 days Passed to solicitors for court proceedings after 50 days of non-payment DCPM, Procedures, Debt Recovery 6