Breathing Space, the Debt Respite Scheme and What They Mean for Landlords
The Covid-19 pandemic will have far-reaching effects on society, long after we have the virus under control. There are areas of legislation that will change the way we live and work, which were created in direct response to the unprecedented events that took over the world in early 2000. One of those is the English and Welsh government’s Debt Respite Scheme, which gives breathing space to those in considerable debt from their creditors, including banks, leasing companies and landlords.
If you want to know what this means for you and your tenants, and how it affects Section 8 evictions, this article explains all.
What is the Debt Respite Scheme?
The Debt Respite Scheme came into force on 4th May 2021 and is targeted at helping those who have suffered financially, as a result of Covid-19 or for any other reason. It prevents their creditors from chasing them for payment for a period of time, which is designed to give them a chance to work out how they will pay off their arrears.
In the property world, this could mean a tenant who is behind on their rent can claim breathing space while they figure out a plan to pay off the debt. If you are told, as a landlord, that your tenant is in a breathing space, you must stop all actions to recover the money. This includes issuing a Section 8 notice, taking steps to recover the property and issuing bankruptcy proceedings. In addition, the landlord must not contact the tenant, and they cannot charge interest on the arrears for the period of the breathing space.
Any tenant who is in problem debt can apply for breathing space under the Debt Respite Scheme. However, it can only be triggered by:
● a debt advice provider who is authorised by the Financial Conduct Authority (FCA) to offer debt counselling
● their local authority, if it provides residents with a debt advice service.
The debt adviser must decide whether breathing space is appropriate given the circumstances. If the debtor could free up the money by budgeting differently, or if they have assets they could sell to raise the money needed, the adviser may not allow them to enter breathing space, for example.
The Two Types of Breathing Space
The above holds true for one form of breathing space:
● Standard breathing space – which can last up to 60 days before the landlord can once again take action to recover their money.
However, there is another form:
● Mental health breathing space – anyone receiving mental health crisis treatment can apply for breathing space without first taking debt advice. If an Approved Mental Health Professional (AMHP) certifies that the debtor is receiving the treatment, this can be used as evidence for the adviser that supports the beginning of a breathing space. This can last for the duration of the patient’s treatment, plus 30 days.
What Happens After the Breathing Space is Instigated?
Once the tenant has their breathing space granted, the landlord cannot contact them for the entirety of the period. The debt adviser is the single point of contact should the landlord have any queries about the process.
It could obviously be a worrying time for a landlord who will not receive the full sum owed to them whilst it continues. However, the tenant is still obliged to pay rent. It is only paying off the accrued debt that is halted during the breathing space. Plus, the debtor still owes the arrears after the breathing space ends; it doesn’t get written off.
Although the idea of not being able to proactively seek arrears for a period of time, it is possible that these breathing spaces will help the tenant get back on their feet and put themselves in a position to pay their debts. Whether this is how it will work in practice will be seen over the course of time.
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