In this article, I will examine, in overview, the implications of the Debt Respite Scheme (Breathing Space Moratorium and Mental Health Crisis Moratorium) (England and Wales) Regulations 2020 for landlords and tenants in the context of private residential properties.
Further guidance for creditors (landlords) and debt advisors can be found online.
The Debt Respite Scheme (Breathing Space Moratorium and Mental Health Crisis Moratorium) (England and Wales) Regulations 2020 (SI 2020/1311), (“the Breathing Space Regulations”, hereafter) came into force on 4th May 2021.
The Regulations introduce two different types of ‘breathing space’: a standard breathing space, and a mental health crisis breathing space. This article will focus on the ‘standard breathing space’.
The (Standard) Breathing Space Regulations
The Breathing Space Regulations offer up to 60 days of legal protection to tenants with rent arrears. The legal protection prevents landlords from enforcing recovery of arrears, communicating about the recovery of those arrears and from applying certain interest and other additional charges on the arrears.
Practical Consideration for Tenants
The onus to enter a breathing space period is on the tenant. To be eligible to enter a breathing space, a tenant must:
- Be an individual
- Owe a qualifying debt (which includes rent arrears)
- Live or usually reside in England or Wales
- Not have a debt relief order, individual voluntary arrangement or an interim order, or be an undischarged bankrupt at the time that they apply
- Not already be in a breathing space, or have entered one in the last 12 months at the time that they apply
If the tenant meets those criteria, then they must make an application to enter a breathing space by contacting a debt advice provider who is authorised by the Financial Conduct Authority to offer debt counselling, or their local authority (where the local authority provides debt advice to residents).
It will then be for the debt adviser to determine whether the tenant should enter a breathing space period. There is no guarantee that a tenant will enter a breathing space simply because they have made the relevant application. The adviser may determine, for example, that a breathing space is not necessary because the tenant can pay the arrears through budget management.
Further, before making an application to enter a breathing space period, tenants should know, in general, they are only able to enter a standard breathing space once every twelve months and that that standard breathing space will only last for 60 days. Tenants should, therefore, think carefully about whether they need to enter the breathing space and should not use it as a default fall back simply because a landlord has requested payment of some arrears if, for example, the tenant is able to agree a repayment plan.
If the advisor determines that the tenant should enter a breathing space period, then they will benefit from the legal protections discussed above.
However, tenants should be aware that entry into a breathing space will not extinguish debts or ongoing liabilities. Tenants should continue to pay rent as it falls due, but they will not be expected to make payments towards arrears which accrued before the breathing space began. If a tenant does not continue to pay ongoing rent, then the debt advisor may choose to cancel the breathing space period. In any event, the debt adviser will carry out a midway review, between days 25 and 35 of the breathing space, to assess whether the debtor is complying with their ongoing obligations.
After the breathing space period comes to an end, a tenant should be prepared for a landlord to be able to carry out enforcement action as usual.
Practical Considerations for Landlords
As above, the initial onus is on the tenant to enter a breathing space period. When they do, the landlord will be sent a notification informing them of the same.
When a landlord receives a notification that a tenant has entered a breathing space period, the landlord should go through their records to identify any other debt owed by the tenant and this should be flagged to the debt adviser. It will then be for the adviser to determine whether any additional debts should also be subject to the breathing space. Any additional debt will not become subject to the breathing space until the landlord receives a new notification from the adviser.
Once notified, the landlord should stop:
- The tenant having to pay certain interest (interest can still be charged on the principal in secured debt, but not on the arrears), fees, penalties or charges for that debt during the breathing space period
- Any enforcement or recovery action in relation to the arrears
- Contacting the tenant to request payment from the tenant (unless the landlord has permission from the Court)
Any attempts by the landlord to contact the tenant about, or to enforce recovery of, the arrears will be null and void. Moreover, the landlord may be liable to pay any costs which the tenant accrues in challenging the landlord’s attempts to recover the arrears. Further, the landlord may find themselves the subject of a complaint from the relevant advisory body.
If the landlord has already started Court or Tribunal proceedings in relation to the arrears that is now subject to the breathing space, then the landlord must notify the Court or Tribunal of that, in writing. Proceedings around the debt (other than enforcement) can continue until the Court or Tribunal makes an order or judgment.
If the landlord hasn’t already started proceedings in relation to the arrears, then they will not be able to seek recovery of them or possession of the property pursuant to them whilst the breathing space period is active. The landlord will not, for example, be able to obtain possession pursuant to Grounds 8, 10 and 11 of Schedule 2 to the Housing Act 1988. However, it will remain open to landlords to obtain possession pursuant to grounds which do not relate to the arrears. Therefore, a landlord’s right to seek possession pursuant to s.21 will not be affected by a tenant entering into a breathing space period.
If a landlord does not consider that a tenant should be eligible for a breathing space, then they can request a review of the breathing space, but they must do so within 20 days of it starting. The request must be in writing, setting out the reasons why a review is requested and should be supplemented by any relevant evidence. If the landlord is not satisfied with the debt advisor’s decision in respect of their request for a review, then the landlord can apply to Court to have the breathing space cancelled. This must be done within 50 days of the breathing space beginning.
Further, as indicated above, a breathing space is not a payment holiday and the debtor should continue to pay any debts and liabilities that they owe. The landlord is entitled to continue accepting payment during the breathing space.
Finally, the landlord will be sent a notification when the breathing space period comes to an end. When it does, the legal protections that the tenant benefitted from also come to an end.
The Civil team at Becket Chambers can provide advice and representation in relation to a wide range of landlord and tenant disputes. If you require such advice or representation, then please do not hesitate to contact our team at firstname.lastname@example.org.