Breathing Space: New rules will give tenants a ‘break’ from debt
A new scheme being brought in this spring will ban banks and landlords from chasing tenants for unpaid debts, by offering them a period of time to try to find a solution to their financial problems.
The Debt Respite Scheme (also known as Breathing Space) will come into force in May 4 and, while the scheme was created with larger lenders in mind, it will impact on landlords – particularly those seeking possession due to arrears.
There are two types of breathing space that a tenant may enter into:
- a standard breathing space and
- a mental health crisis breathing space.
For the most part, both types of breathing space operate in the same way. Creditors are not allowed to contact them directly to request payment of the debt, or take enforcement action to recover the debt (including by taking possession of a property).
However, the duration and frequency of the breathing spaces vary. A ‘standard’ arrangement will last for a maximum of 60 days, for a mental health crisis breathing space, the Breathing Space ends 30 days after the tenant’s treatment ends.
Local authorities providing debt advice and FCA approved debt advisors can grant Breathing Spaces to people in debt – they would be expected to speak to them the establish whether this is the best thing for them.
If they were in a position to pay off the money they owe through proper budgeting or selling things, then a Breathing Space may not be deemed the right solution for them.
If a Breathing Space is thought to be the most appropriate way forward, their name will be added to an electronic record and their creditors will be notified, although the decision can be challenged.
Impact on Section 8 possessions
For most landlords, this will usually occur where the tenant is in arrears. In these cases they cannot serve a Section 8 notice, apply for a warrant or money judgement or receive a possession order during the Breathing Space. They should also not contact the tenant to request payment of the debt during this time.
If there are judgements against former tenants for damage to the property or other unpaid bills, then this will also be covered if they enter a Beathing Space.
It is worth noting that secured debts aren’t covered by Breathing Space rules , so your mortgage lender would still expect to receive mortgage payments during the period your tenant was in their tenant is in a Breathing Space. However it is likely you would be able to come to an arrangement should you explain the situation.
Once notified that your tenant has entered into a breathing space you, or your agent, must not do any of the following until the breathing space has ended:
- Contact the tenant directly in relation to the debt
- Obtain a warrant in relation to the debt
- Serve a notice seeking possession because of the debt
- Sell on the debt to a third party
- Charge interest on the debt over the period covered by the breathing space
- Apply for a judgement in relation to the debt
- Enforce an existing money judgement for the debt
- Take control of the tenant’s belongings during the breathing space
- Request third party deductions from Universal Credit or other benefits
- Start bankruptcy proceedings
You may continue to contact your tenant about anything not related to the debt. For example, arranging repairs or inspections for electrical or gas safety checks. In addition to this, if the tenant has asked to talk to you about a debt solution or debt then you can answer these enquiries.