Independent schools are like any other business and have to be financially sound however when it comes to recovering unpaid school fees they face delicate issues.
A school must consider the best interest of the student but also have a balanced view as to when the formal debt recovery process should be invoked. In order to prevent bad debt, it is very important that schools have robust policies and procedures in place to ensure they act quickly, although each individual case should be considered on its merits based on the circumstances.
Divorced parents or parents getting divorced is one of the most increasingly common reasons for non-payment of school fees as it undoubtedly involves complications. Parents will often blame each other for allowing the debt to escalate in order to avoid liability, however where both parents have entered into a contract with the school, they both remain jointly and severally liable for payment of the fees, regardless of the circumstances surrounding their relationship.
In one case we handled the father had agreed to pay maintenance to the mother which would include school fees but not the extra curriculum activities however both parents were jointly and severally liable to the school based on the signed contract at the time when the relationship had not broken down.
The mother disputed the case as she felt it was the father’s obligation to pay for the all school fees including the extra curriculum activities and it was alleged that he had also agreed to pay. Whilst the father may have felt that he had every right to refuse to pay and felt aggrieved, once the evidence was presented, it was clear that the liability was placed on both parties.
In these situations it is impossible for the school to mediate based on their difference of opinion. The school had told the parents that they were considering excluding the child until such time the fees had been cleared and that they reserved the right to take further action against both parents if the matter had not been amicably resolved. Luckily in this case the father decided to pay and take matters up with mother directly as not to affect the child’s education. In these type of ‘he said, she said’ scenarios it is quite easily possible that the debt accumulates and the situation may quickly escalate. Ultimately both parents were contractually liable in this situation and had the matter proceeded to litigation then it is most likely that a court would have ruled in favour of the school on the basis that the debt was disputed on the basis of whose liability it was and not that the debt was disputed itself and therefore judgment granted to the school against both parties who had signed the contract.
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It cannot be expected that a school will intervene in these domestic issues and the school would rely on the fact that contractually both parents were liable and it was the responsibility of the parents to repay the debt and prevent it increasing.
When it comes to payment of school fees, both parents are liable, assuming that both have signed the contract and even if one parent is the school’s primary contact. Schools should ensure that both parents are kept informed at all times and all demands for sums due are sent to both parents, preferably under separate cover and especially when both parents do not reside at the same address. In doing so you avoid any argument from one parent claiming that a debt has escalated without their knowledge.
Obviously schools will always want to handle divorce situations sensitively but just because parents have separated or divorced doesn’t mean that the school fees should be written off and therefore they may refer the matter to the legal system if required.
Parents encountering financial difficulties is another common reason for non-payment of school fees and therefore they can no longer maintain payments. It is a common situation whereby parents may be asset rich, but cash poor so it’s worth considering that the debt can be secured against an asset, such as a property and thus protecting the school’s interests and eventually leading to a full recovery.
It is needless to say that schools will try to accommodate parents with financial difficulties which can be temporary and so instalment plans can be put in place to ensure all arrears and future fees are cleared in a timely manner. By undertaking an affordability assessment and regular reviews of the debtor’s financial circumstances and asset position, we can identify when their position has improved and a payment in full or increased instalments can be made or conversely if their situation has deteriorated then notify the school in order to make an informed decision. Unfortunately sometimes tough love is the answer to avoid a debt spiralling out of control.
When payments are not made due to a dispute it is important to follow the appropriate policy and deal with the issues head on and thoroughly. Always be commercially minded and consider all possibilities. If a dispute has some merit, it is sometimes better to consider a reduced settlement or instalments as opposed to pursuing the matter through the courts due to the costs that may potentially be incurred and that a court may find in favour of the defendants. Also be wary of reputational issues, as you will know, parents talk and you do not want it to be assumed that reductions will be offered as a matter of course and therefore each case needs to considered carefully.