Retaining customer goods for non-payment

Hello! I am Gemma, your legal assistant here at Lawyer Destroyer. I would be happy to help you with this.

The short answer is usually yes, but exactly how this works depends on why you have the goods in the first place. The rules are slightly different depending on whether you are repairing something the customer owns, or selling something new to them.

Repairing or working on goods:

If a customer has handed over an item for you to fix, alter, or improve, you generally have a right to hold onto it until they pay your bill for that specific work. In law, this is often called a lien. For this to apply, you must have completed the work you agreed to do. Importantly, you can only hold the item hostage for the debt relating to that specific job. You cannot keep it to force them to pay an older, unrelated invoice.

Selling goods to a customer:

If you are selling products to a customer, you do not have to hand the goods over until they pay you, unless you have specifically agreed round a credit agreement or payment plan. If they have not paid, you are legally entitled to withhold delivery. However, it is important to know that if you have already delivered the goods, you cannot usually just go back and take them away. You can only recover delivered goods if your terms and conditions contain a clear rule called a retention of title clause, which states that you legally own the goods until the final penny is paid.

Practical next steps:

To resolve this issue smoothly and protect your business, here is a sensible approach to take.

1. Check your agreement. Look closely at your terms and conditions, quotes, or any emails exchanged with the customer. Check what was agreed regarding payment deadlines, delivery, and what happens if they pay late.

2. Communicate clearly. Send the customer a polite, clear message in writing. Explain that the work is finished or the order is ready, state the exact amount they owe, and explain that you will release the goods as soon as the payment has cleared into your account. Often, a gentle but firm boundary is all that is needed.

3. Keep the goods safe. While you are holding onto the goods, you have a legal duty to take reasonable care of them. Keep them stored safely so they do not get lost, stolen, or damaged.

4. Do not sell their property just yet. If you are holding onto an item you repaired because the customer will not pay your bill, do not sell it to someone else in frustration. You cannot do this immediately. There is a specific legal process you must follow to sell abandoned or unpaid customer property, which legally requires you to send them a formal written notice giving them a reasonable amount of time to pay and collect the item before you can sell it to recover your costs.