Another piece of new legislation is looming for landlords, designed to give legal protections to those in ‘problem debt’.
The Debt Respite Scheme (Breathing Space Moratorium and Mental Health Crisis Moratorium) (England and Wales) Regulations 2020 come into effect on May 4th 2021.
Introduced to tackle the impact of financial difficulties on general wellbeing, the government estimates it will help over 700,000 people in its first year, rising to 1.2m within a decade.
Among them could be one of your tenants.
Here we explore what the new regulations mean for landlords and how you can get prepared.
What is a breathing space?
Within the legislation is the term ‘breathing space’. This describes a short period of time when debt interest, fees and enforcement are frozen for those who qualify.
For creditors, such as landlords with rent arrears owed, this bans them from chasing debtors for payment.
During this time, individuals will receive professional debt advice to find a long-term solution to their financial difficulties.
There’ll be two types of breathing space:
Standard breathing space
These are available to any individual with problem debt and gives them legal protections from creditor action for up to 60 days.
These include pausing enforcement action and contact, plus freezing interest and charges on any debt.
Applications for a breathing space can only be made via an approved debt adviser registered with the Financial Conduct Authority. Or, where they’re approved to offer this specialist advice, through a local authority.
Only one standard breathing space is permitted each year.
Mental health crisis breathing space
These are only available to individuals receiving recognised mental health crisis treatment, as certified by a relevant professional.
With stronger protections than the standard breathing space, it lasts as long as the person’s treatment plus an additional 30 days after, regardless of how long that is.
The government expects 25-50,000 individuals to benefit from this part of the scheme every year.
These protections must stay in place until the breathing space ends.
You can however contact the debtor about anything unrelated to the debt such as routine maintenance and inspections or in response to a regular query or complaint from them. In fact, it’s worth making it clear at the start of the debt respite period that normal communications, not connected to the debt, are permitted and welcome.
And if they ask to speak to you about a breathing space debt or possible solutions, then you can of course enter a dialogue to get the issue resolved.
Just remember that it’s your responsibility not to chase your tenant about the debt until the breathing space expires.
Do tenants granted a breathing space have to pay their rent?
In a word, yes. This legislation isn’t about permitting payment holidays which would result in more debut being accrued.
Tenants are obligated to continue paying their existing liabilities when they’re due, including scheduled rent payments which fall during the breathing space period.
If they fail to do this, their breathing space may be cancelled earlier than its expiry date.
What happens at the end of a breathing space?
When the breathing space comes to an end, creditors are notified of the date electronically. If it comes to an end prematurely, either because it’s been cancelled by the debt advisor or court, or if the debtor has died, the notification will tell you the reason.
Once the period has expired, you can:
Start to apply interest, fees, penalties and charges to the debt from the date the breathing space ends. You can’t backdate these amounts unless a court has given you permission to do so.
Contact your tenant about the debt.
Take any necessary action to enforce your debt.
Start or continue any legal proceedings.
As with all applicable legislation, it’s best to familiarise yourself with the ins and outs of how it works. Doing so boosts your reputation as a responsible landlord while also giving you peace of mind that you’re adhering to all relevant laws.
For more information and advice about your legal responsibilities as a landlord, explore the MakeUrMove blog.