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  • Late payment of debt for SMEs Oct 1, 2020

    Late payment of invoices has been a long-standing problem in the UK. Many businesses, especially smaller firms, experience problems where their customers delay payment for extended periods. Often the late payers are large companies who deliberately delay payment to their creditor SMEs. The larger company (or government department) may do this to improve their own cashflow, or to gain interest on the (substantial) sums retained; in some cases it is simply down to slow payment processes.

    Invoices are typically paid late 30 to 150 days after the due date. The problem has been exacerbated by Covid, in which over 60% of small businesses have reportedly been subject to entirely frozen or severely delayed payment.

    The Late Payment of Commercial Debts (Interest) Act 1998 came into force on the first of November 1998. It has since been amended multiple times by various governments, yet 20 years into the legislation little headway has been made into the problem.

    This Act allows UK business owners to (automatically) charge additional interest where a customer is late paying an invoice. On top of additional automatic interest, it also awards the business modest compensation from the debtor, starting at £50 upwards. These rules for interest and compensation are automatically implied into every business-to-business contract, unless the terms of the contract specifically exclude it.

    Generally speaking, the public sector pays more quickly than the private, however some public authorities still fail to pay their suppliers within 30 days.

    Despite the Late Payment Act being for two decades, it has had little effect on deterring late payers. Some suppliers are unaware of the rules and so do not enforce them. The larger problem is in perceived ‘penalising’ of a late payer. Given there is often a power imbalance between the supplier owed (a small business) and the late payer (large business), the large business may be happy to take their money elsewhere on future work.

    Nonetheless, in some circumstances it makes sense to apply the late payment rules and claim the extra compensation and interest. First is where you anticipate that you will not have any future work with the client; here, there is no future relationship to sour. Second, where you are already beginning legal processes to recover the debt (you may as well take the extra money). Third, where you are one of the only suppliers of a given good or service, and so the debtor has no choice but to continue business with you.

    The total value of late payment interest and ‘compensation’ awards goes into the hundreds of billions of pounds per year; in practice only a slither of this will ever be recovered. It remains to be seen with huge payment freezes and delays introduced by Covid whether SMEs become more aggressive on recovering late paid debt, as for some it will be a matter of solvency or game over.

    We have a free late payment calculator available here for any business interested to know how much they could receive extra for their overdue invoices.
  • What property owners ought to know about this year’s change to japanese knotweed rules Sep 29, 2020

    It’s been a tumultuous year for buyers and sellers of all assets, including real estate. With the majority of news stories covering Covid-related developments, it’s been all too easy to miss changes in the smaller things. As these smaller things can often be quite significant “gotchas” for sellers (when it’s too late), here is one development you’ll be thankful to know...

    What is japanese knotweed?
    Japanese knotweed is a highly invasive plant which has the tendency to encroach onto neighbouring land. The Environment Agency has described it as one of the ‘most aggressive, destructive and invasive plants’ in the UK. It can spread undeterred through tarmac, concrete, driveways and drains.

    Knotweed is treatable, but can be an expensive exercise depending on the scope of work involved. Treatment costs typically range from a few thousand (in domestic settings) to multiples of tens of thousands and more for commercial properties.

    Having a property with any association with knotweed can affect the house price significantly, by up to 10%. Up to 5% of all UK propertiesare estimated to be affected by it.

    The legal cost of Japanese Knotweed is growing
    Over the past few years, the courts (encouraged by claimant japanese knotweed solicitors) have expanded the scope of liability for landowners who enable knotweed to intrude upon adjacent land.

    Following a case in 2018, the courts now award damages for what is called “loss of amenity” of the land. This liability operates in addition to prior case law, which awards damages to cover the cost of treating the problem, as well as the estimated reduction in value of an affected property – or even the stigma of such. This is an area which should therefore be on the radar for property owners with untreated knotweed, as well as their insurers, as liability can be quite substantial.

    The change in rules in 2020

    Anyone who has sold a property will be familiar with the Property Information Form (known as TA6): it forms part of the contract, and can give rise to legal liability if any information on it is incorrect or misleading. A new (fourth) edition was released earlier in 2020, making amendments made to current guidance for sellers on disclosing the existence of knotweed.

    Question 7.8 asks “[whether] the property affected by Japanese knotweed”, offering the choice between “Yes”, “No” and “Not known”.

    Unless the seller is absolutely sure there is no knotweed, in order to save themselves from liability, sellers should answer ‘Not known’. Indeed, there appears to be no incentive to mark “No”, which now serves to provide evidence for knotweed compensation lawyers when aggrieved purchasers discover the problem further down the line.

    The revised form (and its accompanying guidance) says in full:

    “The seller should state whether the property is affected by Japanese knotweed. If you are unsure that Japanese knotweed exists above or below ground or whether it has previously been managed on the property, please indicate this as ‘Not known’. If ‘No’ is chosen as an answer the seller must be certain that no rhizome (root) is present in the ground of the property, or within 3 metres of the property boundary even if there are no visible signs above ground.”

    It’s worth noting that if a seller puts “Not known”, it’s all on the buyer to make their own enquiries and to satisfy themselves that there is no problem.

    If you have any questions about knotweed as either a property seller, or someone who has recently bought a property with knotweed, it is easy to speak to a qualified solicitor who can provide free advice. Just get in contact with the link above.

    Author Bio provides free advice and guidance on everyday areas of consumer law, and puts people in contact with free expert solicitors to help resolve ongoing disputes.