Published: 03/03/2021 By Donna CowanBreathing Space – what is it and what does it mean for landlords?
The Debt Respite Scheme (Breathing Space Moratorium and Mental Health Crisis Moratorium)(England and Wales) regulations come into force on 4th May 2021. The scheme allows a debtor to apply for a “breathing space” if they have qualifying debts that they are unlikely to be able to repay.
For residential landlords:
If you are served with a notification from the Secretary of State informing you that a debt owed by a tenant is in a “moratorium”, you must stop all action related to that debt.
As of 4 May 2021, individuals who have unsustainable debts can apply for a breathing space moratorium from an approved debt advice provider, under the new Debt Respite Scheme (Breathing Space Moratorium and Mental Health Crisis Moratorium) (England and Wales) Regulations 2020 (the “Regulations). If this application is accepted, then for a period of 60 days, creditors will not be able to contact the individual directly in relation to the debt; most interest and other charges will be frozen on the debt; and creditors and their agents will be prevented from taking certain enforcement action.
Rent arrears are a qualifying debt under these Regulations so, in practical terms, this means:
- A landlord cannot serve a section 8 notice which cites grounds 8, 10 or 11 as the basis for possession as these involve rent arrears or persistent late payment of rent;
- A landlord will be prevented from applying for a possession order under these grounds;
- In cases where the landlord has already been granted a possession order, that order cannot be enforced;
- A section 21 notice can still be served and enforced against a tenant who is subject to a moratorium;
- A section 8 notice can still be served, provided it cites grounds for possession which are not related to rent arrears;
- Tenants will still be expected to continue to pay their rent whilst the moratorium is in place and failure to do so will allow a landlord to apply to the debt advice organisation or the courts to have the moratorium cancelled or to permit enforcement action on the grounds of arrears.
- The debtor is unable, or unlikely to be able, to repay some or all of their debt as it falls due; and
- A breathing space moratorium would be appropriate – there are a list of factors to consider when deciding whether it is “appropriate”. it would clearly not be if they had funds or an income to allow the debt to be paid.
The type of scenario where a breathing space might be used is where someone has had their wages temporarily reduced to 80% due to being furloughed in the current climate and is, as a result, struggling to pay their rent. This step would not be appropriate, however, for those who will have no reasonable means of paying their debts regardless of breathing space, for example, if they have lost their job. Similarly, those who could pay their debts with some budgeting help are also not likely to have their application accepted.
For those who are receiving mental health crisis treatment, there are stronger protections written into the breathing space and it lasts for as long as the person's mental health crisis treatment is in place, plus 30 days.
As a landlord, you need not despair. Greenwood’s Rent and Legal warranty covers this, so it does not have to be an issue. The good news is the cover has now been extended to 15 months to take into consideration how long it now takes to evict tenants. This also covers legal fees up to £100,000 !
If you require advice and assistance in relation to this or any other landlord and tenant matters, then please email email@example.com or call on 01206 616820.