The question was posed to me last week regarding whether a landlord’s rent could be garnisheed from an agent’s trust account. The agency had been issued with a garnishee order to pay to the debt collector all rent kept in the trust account. They were provided with two documents:
- Garnishee order;
- A judgment debt for the payment of the order.
The agent was left in a conundrum:
- Do they pay the money in accordance with the orders of the court?;
- Are they required to only pay money on the basis of the direction of their landlord?
Section 86 of the Property, Business and stock agents Act 2002 states that money can only be paid out of the trust account on direction of the principal, being, the landlord. Any payment otherwise is considered a defalcation and is punishable by an agent losing their license. The question was, which one prevails: the court order or the garnishee?
A court cannot make an order that is unlawful. Hence, the garnishee is unlawful if it requires an agent to do something that is unlawful. Alternatively, if the agent refused to pay in accordance with the garnishee order, they could be taken to court under s 123 of the Civil Procedure Act and may face costs.
What also became an issue at law was that, the common law surrounding garnishees says that a court can garnishee any money held by the subject (i.e. the landlord).
After balancing all these different issues, Leverage made a determination that the garnishee order should be complied with. First, if an agent is ordered to something which lawfully they must do, Fair Trading would have difficulties taking any action against the agent; and secondly, no agent should place themselves on the line to have a cost order made against them in protection of the landlord. On balance, the risk was lesser in complying with the orders of the court.
If you get a garnishee order, always receive legal advice. The two things which you should consider are that:
- You will never be punished for doing something lawfully ordered by the court;
- The commission which is payable to you at the end of the month is yours and not the landlords and may lawfully be deducted from the sum paid to the debt collector.
Please note that, garnishee orders can only be utilized once. Therefore, you only need to pay it out once within 14 days of receiving . This may be a regular occurrence in the industry in the future as people co-chase debts after people. As noted above, make certain you get legal advice to be placed on your file if Fair trading later investigates.