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What to do if someone owes you money

Here, Amanda Hamilton, NALP, looks at a few circumstances in which you may be owed money and reveals how to approach each situation.
By Editorial on Mar 1st, 2018   @freelotteriesuk

Maybe you lent money to a friend and they haven’t repaid you as agreed, or maybe you sold an item to a person you know (or thought you did) and they have taken the goods but not paid you?

Perhaps you paid a deposit on a rented flat and, on leaving at the end of the tenancy, the Landlord refused to return the deposit, despite you leaving the property in good condition?

The first rule of thumb is to ensure that you have an agreement in place, preferably written! It may seem odd to mention that it should be in writing, but in law you can create a contract verbally, although it is very difficult to provide proof that it exists!

Whether it is with a friend you ‘trust’ or not, you should always put something down on paper and both parties should sign and date it. The ‘contract’ can be as short or long as you like, and it doesn’t have to be in legal jargon as long as both parties understand what it means and sign it to verify that they do. Importantly, this means that you do not have to employ a solicitor to draft it for you.

Let’s look at each of the examples above in greater details.

You lend money to a friend

A short contract should be drafted containing the lender’s and the borrower’s name and address, the amount of money lent and when it is to be paid, the agreed amount of instalments to pay this back and when these should commence and end. Both parties should then agree it, by signing and dating it and each should have a copy. If anything goes wrong, eg the payments are not made as agreed, then there is a contract in existence which will be proof that both parties agreed to comply with the terms.

Selling an item to someone you know

Even if you trust someone implicitly, it’s always best to have a written agreement. There could be a situation which warrants you allowing the ‘buyer’ to take the item or goods on the understanding that they will pay for it on another day to be agreed. As with the above example, writing something down is the best insurance you have if the monies are not forthcoming. Such an agreement should state the seller’s and buyer’s name and address, a description of the item being sold, the agreed amount it is being sold for and when the payment should be made. Both parties should agree to this by signing and dating the agreement.

Landlord refusing to repay a deposit

You may think this scenario is difficult because, at the end of the day, it may be your word against the Landlord’s as to whether the property has been left in good enough condition. Not so! Taking photos or a film of the state of the property room-by-room when you move in with a date imprinted, and then again when you are moving out of the property may well be enough proof to guarantee your deposit being returned. Send the photos or film to the Landlord and ask him/her to agree in writing that this is the condition of the property at that the time you moved in. Then when you leave, do the same again. Always get the Landlord to agree this in writing.

However, what would happen if the ‘friend’ ‘person you know’ or ‘Landlord’ still refuses to pay you the money that is owed?

Most situations don’t end up in court but, if there is no alternative but to do so, then, provided the amount of money is small enough, you can deal with it yourself without employing the services of a solicitor.

Small claims court

The ‘small claims court’ which is part of the County Court was originally created to enable a lay-person (someone who is not legally qualified) to take another individual to court. The maximum amount of a claim in those days was £20!

Nowadays, the maximum amount of a claim that you can deal with yourself in the small claims court is £10,000!

However, it’s important, before you take someone to court, to consider various factors. Firstly, you may think it is worth making a claim initially, but what happens if the ‘defendant’ (the person owing the money) decides not to pay or defends the action? What do you do? Well, if you decide to pursue the individual, it will most certainly incur further costs. If it gets to a hearing, then hearing fees need to be paid. If the case goes beyond this, then you may have to apply for judgment against the defendant and possibly enforce the judgment – incurring further fees.

Think about the costs

So basic advice would be to think very carefully about possible costs before taking the court action step.

Also, if the person is a friend, then consider the consequences of taking court action in light of your friendship, which will probably not survive after proceeding in this way!

Of course, you may decide that the person, having done what they did is no friend at all. In which case, the first thing you need to do is to write to them clarifying why they owe you money and that you are thinking of taking court action if the amount owed is not paid by a certain date. All the necessary evidence must be provided to them with the letter, even though you know that they have the facts already.

Writing a letter before taking any action is a very important part of the process and fulfils what is known as the ‘protocol’. Without having done so, you may jeopardise your case if it does end up in court.

It is not a free service as there is a claim fee to pay that is dependent on the amount of the claim. For example, fees range from £35 for a claim up to £300 to £455 for a claim from £5,000 - £10,000. If you decide to issue a claim online, fees are generally less.


If you decide, for whatever reason, not to take court action there is an alternative; mediation. This provides individuals and businesses with a low cost method of resolving a legal dispute without the need to go to court. There is usually a fixed hourly fee to pay by both parties.

If going to court is your intended action, then what is required after sending the ‘protocol’ letter and allowing the time limit for payment to pass, is to fill in a form known as a Claim Form N1. You then send the completed form the County Court Money Claims Centre in Salford and pay the court fee (mentioned above).

What happens next depends on whether the ‘defendant’ agrees to pay the amount or refuses to pay or ignores the whole thing!

The defendant has 14 days to respond, after which time, if there is no response, you may decide to issue a county court judgment against the defendant. This, in itself, has quite serious consequences for the defendant because a copy of all CCJs go to a public company and may affect any credit search made against the defendant’s name – a good and useful tool to add into any pre-action protocol letter that you send!

This article was provided by Amanda Hamilton, of the National Association of Licenced Paralegals.