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Thursday24 July 2014

How can we tackle debtors without in-house counsel?

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What steps can smaller practices take to recover debts without the luxury of an in-house lawyer?

Question: Bigger practices may have an in-house lawyer to negotiate debt recovery, but what can smaller practices learn from how in-house counsel works?

Answer: In the current climate, cash is king and debt recovery is more important than ever. It can be difficult enough if the debtor is in the UK, but litigation abroad is time-consuming, expensive and rarely straightforward. For this reason I urge all practices to negotiate and use litigation only as a last resort.

Of course, anyone can talk to clients about getting paid, but the benefit of an in-house lawyer is that they can use their training and experience to play out the situation and use the strategy and tactics appropriate to each debtor.

It also helps to focus the client’s mind to let them know the issue has been escalated internally to the in-house counsel. While an architect can spend several weeks negotiating and failing to reach a satisfactory agreement, a lawyer can normally find a solution within a week by using effective and well-considered negotiation.

Taking a sensible position is vital but applying pressure is also important. And remember, there is a balance between recovering debt and retaining an effective relationship with the client.

An in-house counsel will be mindful of this — whereas once the issue is with outside solicitors, the other side then instructs their solicitors and, very quickly, what was a good working relationship between architect and client risks breaking down.

Of course, in-house counsel is beyond the reach of smaller practices; but when recovering debt from clients, all practices regardless of size should remember the following: maintain a dialogue with your client; consider how to escalate the issue without instructing solicitors; stay calm and remain factual; be clear about what it is you want and what you will accept (two different things) when negotiating; if you make a threat such as stopping work if payment is not received within a set period, then be prepared to carry it out, otherwise your negotiating position will be undermined; and finally, have all your facts and paperwork organised to support your position.

Scott Taylor is a barrister specialising in construction law. He most recently worked in-house at John McAslan & Partners and is currently reading part-time for an MSc in Construction Law and Dispute Resolution at King’s College, London.

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