26 May 2022

Opinion from Adrian Leopard & Co

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I have paid a deposit for my daughter’s wedding reception. It’s safe – right?
Adrian Leopard 459

I have paid a deposit for my daughter’s wedding reception. It’s safe – right?

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No obligation to hold deposits in ring-fenced accounts.

One of the worries which is emerging as a result of the lockdown is a complex area of business which many people find catches them out. That is the payment of advance deposits to make bookings and this is not just for wedding receptions but throughout modern life, and most notably with your deposits for package holidays and airline tickets.

With travel, there is a considerable measure of protection with organisations like ABTA and ATOL, and even making payment by credit card but even so the system is not fool-proof. However where it becomes much more distressing is indeed for private events like wedding receptions, birthday parties, celebrations and so forth.

Where do you stand if you have made a non-refundable booking for your wedding reception at a posh country house hotel and now it cannot take place because of the lockdown? In such circumstances, this is a force majeure issue and as the event cannot take place due to the fault of neither party, the contract is effectively void and you are entitled to your money back.

That may not be so clear if the booking is for a time later in the year and it is not known whether the lockdown will still be in force, which in the case of hospitality bookings, may well be the case. The venue may well be justified in saying that at this point in time, there is no certainty the event must be cancelled. You may be offered a credit or you may be offered the opportunity, if it is cancelled, to move it to another date, perhaps next year. If you accept that you may lose your right to a cash refund altogether.

Where this becomes difficult is in those cases where your money has already been spent on someone else’s function, or just simply paid into a bank account which has been used to pay off other creditors, may be just the bank overdraft. In other words, they have not got the cash to repay you – and if they go out of business you will just become a creditor and have to take your chance with all the other creditors.

Indeed, a trend of “closures” looks like it has already started. Hospitality businesses are already “unexpectedly returning to the market” and there are really quite a lot of such premises “now closed”. I would not blame anyone for withdrawing from a purchase in the present difficulties – indeed I expect banks are precipitating some of the withdrawals by simply withdrawing the mortgage offers.

When businesses close without funds to repay creditors, it is immensely distressing – people looking forward to monumental celebrations, perhaps over a period of a year or so. Not only do you have to think about re-scheduling the event, but then you have to fork out yet more money because the company you contracted with has gone bust and the new owner may have no contractual obligation to give you any credit at all. Your event may be a 50th birthday celebration – all rather flat a year after the event.

The problem runs very deep because if businesses cannot use the advance deposits paid to them to actually run their businesses, then they be unable to operate at all. It is all down to having enough capital. With the Covid-19 crisis, when the lockdown is over, hotels and other hospitality businesses will need capital to start back up and re-build. At this stage no one knows how long that will take or how difficult it might be. People will always have to eat and drink so that business may be a lot quicker in re-establishing than, say, an airline promoting flights or package holidays. As I have pointed out before, previously profitable businesses will have a much higher chance of survival than those teetering on the edge.

If instead of demanding a cash refund for your cancelled event, you are prepared to accept a credit, then there is a greater chance of you getting your value in the end because it will give the business a breathing space, whereas a demand for cash may just help to bring it down that much more quickly. There is moral to the story – if you want to book an event in advance, think about how much deposit you realistically should be paying. After all, the hotel should be charging you a fair figure to guarantee the date, not try and get most of the payment a year in advance. But further, make sure you pay by credit card, not debit card or charge card. This will give you the best chances of getting your money back.

Adrian Leopard 23-04-20

Photo Jeremy Wong

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Adrian Leopard & Company is the trading name of Alderney Offshore Ltd, a company registered in Alderney, Channel Islands number 1220.

Address P O Box 1027, Alderney GY9 3AS

Registered Office Seldomin, Longis Road, Alderney GY9 3YB.

Adrian Leopard & Co is represented in the UK by 3CL (UK) Ltd trading as Adrian Leopard Associates.

Telephone enquiries may be made on 08449-4-08449 or 01684-230360.

E Mail [email protected]

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