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From 4 May 2021, The Debt Respite Scheme (Breathing Space) comes into force. This scheme provides debtors with the right to legal protection from their creditors.
One of the eligible debts which allows the Breathing Space scheme to be triggered is rent arrears. This will undoubtedly impact landlords and their ability to pursue possession action and/or recover unpaid rent arrears in those cases where arrears have accrued.
What is Breathing Space?
There are two types of Breathing Space:
- Standard Breathing Space is available to anyone with problem debt. It provides them with legal protection from creditor action for up to 60 days. The protection includes pausing most enforcement action, contact from creditors and freezing most interest charges on the debt.
- Mental Health Crisis Breathing Space is ONLY available to someone who is receiving mental health crisis treatment. It lasts as long as the person’s mental health crisis treatment is ongoing, plus an additional 30 days. There is no maximum limit to how long the treatment can last. A number of people can contact a debt advisor on behalf of a debtor for a mental health crisis Breathing Space such as their carer, social worker or solicitor.
Breathing Space can only be granted by a debt advice provider authorised by the FCA to offer debt counselling or a local authority that provide debt advice to residents.
To be eligible to enter Breathing Space, there are various requirements, for instance, the individual must live in or usually reside in England or Wales and cannot have a Debt Relief Order, an Individual Voluntary Arrangement, an interim order or be an undischarged bankrupt at the time of application.
What happens if a tenant enters into a Breathing Space?
If a tenant is in arrears, then it will not be possible to serve a Notice of Seeking Possession, pursue a Possession Order or obtain or enforce a money judgment or apply for a Warrant for Possession during the Breathing Space.
When notified of a Breathing Space, landlords will also be prohibited from contacting the tenant directly to request payment of the debt or make any attempt to apply for third party deductions from Universal Credit or other benefits.
If court proceedings are already issued when you are notified about the Breathing Space, landlords or their advisers must contact the court and inform them in writing.
You can continue to accept payments from the tenant in the Breathing Space period if these are offered/paid.
If the pause during Breathing Space results in the time limit for enforcement or new claims relating to the claim to run out, this is extended to eight weeks after the Breathing Space ends.
Is there a way to terminate a Breathing Space?
Certain debts are considered to be ongoing liabilities and this includes current rental charges (but not arrears). If the tenant does not continue to pay their current rent, this could result in the debt advisor cancelling the Standard Breathing Space (unless the debt advisor believes the tenant does not have the financial means to do so). The debt advisor MUST complete a midway review between days 25 and 35 to make sure the tenant is complying with their obligations. If you can prove that the tenant has the means to pay their current rent but they are not doing so, then submissions can be made to the debt advisor to cancel the Standard Breathing Space. The death of a tenant will end a Standard Breathing Space.
A Mental Health Crisis Breathing Space does not have a midway review and will continue for the duration of the treatment unless the debt advisor believes that the treatment contains inaccurate, misleading or fraudulent information.
The only other way to terminate early is at the request of the tenant.
This scheme will have wide-reaching implications for our registered provider clients. Clients will need to put in place systems to recognise the Breathing Space scheme to ensure that no contact is made with the tenant during the Breathing Space Period, no judgments are enforced, courts are properly notified in relation to existing proceedings, and where any time limits expire the eight-week extension period is utilised.
How popular the take up of the scheme will be and the extent of the impact on rent possession claims remains to be seen.
For more information
For further information in relation to any of the above, please contact your relevant ACS contact or Emilie Pownall.
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