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.
The Debt Respite Scheme (Breathing Space Moratorium and Mental Health Crisis Moratorium) (England and Wales) Regulations 2020 sets out the new rules.
The scheme is designed to give someone with debt problems the right to legal protections from their creditors for a limited period of time. There are two types.
- The first is a standard breathing space. This gives protections from a creditor for up to 60 days and includes pausing most enforcement action and contact from creditors. Landlords will not be allowed to contact tenants about a debt or ask for payment during the 60 days.
- The second is a mental health crisis breathing space, which is given to someone who is receiving mental health crisis treatment and lasts as long as the treatment, plus 30 days (no matter how long the crisis treatment lasts). The person receiving mental health crisis treatment does not have to access debt advice first, but evidence from an Approved Mental Health Professional is required to allow a debt advice provider to start a moratorium.
Tenants will not just be able to announce they are on a 'breathing space'. They must seek debt advice, and it is the advice service who will notify the landlord that a 'breathing space' has started.
From that point you as the landlord will not be able to contact your tenant about the debt, or take any enforcement actions such as obtaining a warrant for debt, or serve a notice seeking possession because of the debt.
You may continue to contact your tenant about anything not related to the debt. For example arranging repairs or any statutory duties 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.
Landlord Law has done a webinar on the Five issues to be aware of with the new 'Breathing space' regulations, where Solicitor David Smith explains the new 'breathing space' regulations coming into force in May.