Debt Respite Scheme For Rental Arrears
The government has just uploaded details of its new Debt Respite Scheme (Breathing Space) – which will become law in May.
The incoming Debt Respite Scheme regulations is aimed at people in ‘problem debt ‘allowing them the legal right to protection from being ‘harassed’ by creditors which of course will have a major impact on private landlords and agents with tenants in rental arrears as they will be unable to chase them up to pay the amounts owing.
The new details are now available on the Gov.uk site which can be viewed here and needless to say are ‘extremely comprehensive’.
The details set out the two types of breathing space which can apply and are – a standard breathing space and a mental health crisis breathing space.
The standard breathing space is available to any person who has debt problems and gives them the right to legal protection from their creditors for up to 60 days.
The new legislation include: “The protections include pausing most enforcement action and contact from creditors and freezing most interest and charges on their debts”.
People can be awarded the standard breathing space although the government does state it “is not a payment holiday”, but must be applied to on their behalf by an approved debt adviser registered with the Financial Conduct Authority, alternatively individuals can request their local authority to do so only if it has been approved to offer this support to its communities.
However, any person who applies for ‘the standard breathing space can only do so for up to one year’s ‘grace’.
People who receive recognised mental health crisis treatment are able to apply for a mental health crisis breathing space.
They will need to provide certification from an approved mental health professional stating they are undergoing mental health crisis treatment, a professional may in some instances apply on behalf of an individual.
There are much stronger protections in place for the mental health crisis breathing space than the standard breathing space. The period of the breathing space remains in place for the length of time as a person’s mental health crisis treatment, with an extra 30 days after the treatment has ended and there is no time constraint.
If a landlord (or any other creditor) is owed arrears and a tenant has been awarded a ‘breathing space’, then under no circumstances can they engage in any way of attempting to retrieve the debt, and can only do so when the breathing space period has ended.
Additionally, if a landlord has received a breathing space notification and sold their property to another investor or private buyer then they must inform the creditor that the breathing space has started and forward their contact details onto the debt adviser.
The government’s advice says: “If you do not do this as soon as possible, you’re liable for any losses the debtor or the assigned creditor have as a result”.