Debt respite scheme - 4th May 2021
Debt Respite Scheme (Breathing Space Moratorium and Mental Health Crisis Moratorium) (England and Wales) Regulations 2020 came into force on Tuesday May 4th, 2021 meaning that tenants who are in rent arrears have "breathing space" in order to get their debt managed, before being pursued through the courts for their rent arrears.
During the COVID-19 pandemic, around 700,000 people are struggling with problem debt meaning that they are unable to pay their living costs, mortgage, rent, and other bills. This new scheme gives people a 60-day breathing space to pay off their debts or set up a payment plan with their creditors. The new act means that anybody who is in debt can seek a moratorium from an approved debt advice provider.
Who can apply for breathing space?
Anyone can apply for breathing space if they’re struggling to pay their debts and there are various ways to find a Debt Management Plan (DMP) provider, including:
- through your local Citizens Advice Bureau
- asking National Debtline for a referral
- if you're already having debt advice or counselling, asking for a recommendation from your adviser
- if you have friends or family with a DMP, asking them for a recommendation.
Ensure that you always check your adviser is registered with the Financial Conduct Authority.
What is breathing space?
Breathing space is a government scheme which is designed to give you time to receive debt advice and find a solution to sort out your debt problems.
- standard breathing space
- mental health crisis breathing space
The "standard breathing space" is available to anyone experiencing problem debt. This breathing space gives them legal protections from creditor action for up to 60 days and includes pausing most enforcement actions and any contact from creditors, while freezing most interest and charges on the debt.
The "mental health crisis breathing space" is only available to those receiving mental health crisis treatment and it will last throughout the person’s mental health crisis treatment, plus an added 30 days (no matter how long the crisis treatment lasts).
It is important to note that both types of breathing space are not a clearance of the debt. Whilst the debt cannot be enforced during this period and interest cannot be charged on it, the person in debt is still legally required to pay their debts and liabilities. This means that any tenants in debt should continue to pay any debts owed to their landlords and, where they already have a payment plan in place, should continue to uphold that plan. Breathing space will last for 60 days as long as you remain eligible. Once the breathing space ends, creditors will be able to collect the debt in the usual way.
How does breathing space affect the landlord?
- An electronic or postal notification will be sent to the landlord if any one of their tenants has been granted breathing space.
- This applies to breathing spaces for any debt and not just those debts associated with the landlord, such as rent arrears.
- The notification will confirm the breathing space period, start and end, so that the landlord knows when they are able to restart any action for the debt management. Landlords or their letting agents, CANNOT contact the tenant during the breathing space period unless it’s regarding a separate matter, like safety checks, maintenance or routine visits.
If a Section 8 Notice has been served to tenants under grounds 8, 10 or 11 prior to the commencement of "breathing space" landlords and letting agents are unable to take any enforcement action against the tenants in rent arrears during the period of the "breathing space". Any new Section 8 notices issued and served on a tenant from 4 May must now include details of the Breathing Space Scheme and Section 8 notices issued with an out-of-date form will be invalid. We would always recommend that a landlord uses a specialist eviction agency such as Landlord Action for the serving of Section 8 Notices, to avoid costly and timely errors!
How does breathing space affect the rent arrears?
This scheme does mean that landlords who are facing arrears on their rental properties will need to find alternative payment methods for any outstanding mortgage payments on their rental properties, if their tenants are awarded breathing space respite from their rent arrears. At Cherry Lets we work hard to ensure that debt is well managed in a timely fashion, and we hope, therefore, that none of our tenants will require breathing space assistance.
We run a rent guarantee insurance scheme for our managed landlords, meaning they are adequately covered should the unthinkable happen.
If you are worried about any rent arrears on your managed property, please get in touch.