The next major piece of legislation to affect the lettings market comes into force today (4th May). The Debt Respite Scheme (Breathing Space) will give someone in problem debt the right to legal protections from creditor action. The protections include pausing most enforcement action and contact from creditors and freezing most interest and charges on their debts.
There are 2 types of breathing space:
Standard breathing spaces
A standard breathing space is available to anyone with problem debt. It gives them legal protections from creditor action for up to 60 days. The protections include pausing most enforcement action and contact from creditors and freezing most interest and charges on their debts.
A standard breathing space can only be started by:
- a debt advice provider who is authorised by the Financial Conduct Authority (FCA) to offer debt counselling
- a local authority (where they provide debt advice to residents)
Mental health breathing spaces
A mental health crisis breathing space is only available to someone who is receiving mental health crisis treatment and provides stronger protections than a standard breathing space. It lasts as long as the person’s mental health crisis treatment, plus an additional 30 days (no matter how long the crisis treatment lasts).
If an Approved Mental Health Professional (AMHP) certifies that a person is receiving mental health crisis treatment, the AMHP’s evidence can be used by a debt adviser to start a mental health crisis breathing space.
In addition to tenant themselves, the following people could apply for the mental health breathing space on their behalf:
- The tenant’s carer/care co-ordinators
- Approved Mental Health Professionals or mental health nurses
- Social workers
- Independent mental health advocates or mental capacity advocates appointed for the tenant
- A tenant’s representative
So, what does this mean for you as an agent and, in turn, your landlords and tenants? We talked to Landlord and Tenant specialists Ashley Taylors Legal to gain perspectives from the legal experts on what this will mean in real terms for landlords and letting agents.
The Debt Respite Scheme (Breathing Space)
The Legal Lowdown with Martyn Taylor at Ashley Taylors Legal
How long does a Breathing Space last?
MT: 60 days from registration with a mid-term review unless it’s a Mental Health Breathing Space in which case there’s no maximum period, but it is limited to 30 days after the person is deemed to have recovered from their mental health crisis.
If a tenant is granted a breathing space, is an agent or any appointed representative allowed to contact the tenant to discuss rent arrears?
MT: No! Agents and any of their representatives are not able to contact tenants to discuss any rent debt which is safeguarded by a breathing space moratorium. If, during conversations around other elements of managing the tenancy, the tenants offer resolution for any outstanding rent protected by a breathing space then this can be discussed. But the conversation should be very carefully and clearly recorded to prevent any dispute after the fact. It would be better to deal with the Debt Advice Provider (DAP) as you will be dealing with one debt and the DAP will be looking at the whole picture of the tenant’s debt.
How should agents account for rent received by tenants safeguarded by a breathing space?
MT: It would be prudent to allocate the payment to any rent arising since the registration of the Breathing Space, and not the historical debts. The historical debts should be covered by the Breathing Space. Current and future liabilities after the registration of the Breathing Space are not; i.e. The tenant owes 3 months’ rent arrears at the point their Breathing Space is granted (Jun/Jul/Aug rent payments). If monies are received in September, attribute the payment towards rent due in September and do not retrospectively allocate it to any of the preceding unpaid months. However, the debts and liabilities remain and, whilst you may not request payment, if the tenant specifically pays any of the debts or money towards the rent arrears protected by the Breathing Space, you may continue to accept it. You would not be expected to refuse payment.
Once the Breathing Space moratorium has expired, can possession claims be submitted for rent owed which was included in safeguarded debt and eviction sought against these rent arrears?
MT: Yes, if there is no formal debt solution agreed or in place. Otherwise, until the agreement fails, no! But debts outside the Breathing Space safeguard can form a new claim so long as they do not form part of the agreement and it would be common that future payments are included in any such agreement.
How many Breathing Spaces can individuals be granted (both standard and mental health) and can a standard breathing space be followed by a mental health breathing space?
MT: Only one standard Breathing Space agreement can be made in a twelve-month period. A Mental Health Breathing Space, however, can be registered at any time and requires an Authorised Mental Health Practitioner to properly confirm a mental health crisis and has no limitation about a previous Breathing Space.
How do Breathing Spaces affect on-going claims/eviction processes for pre-existing debt? Are these resumed once breathing spaces end?
MT: During the Breathing Space period all current claims/evictions that are debt/rental arrears based may continue until an Order or Judgment is made. It is the Judgment that cannot be enforced. No actions that are based on the debt covered in the Breathing Space can be commenced. After the Breathing Space is ended, it depends on the debt solution terms.
If a landlord has a tenant under a Breathing Space, and they then find themselves in financial difficulty with their mortgage lender or other property bills, what are their options?
MT: They can appeal to the DAP regarding the Breathing Space decision claiming hardship themselves. Alternatively, the landlord can apply to the Court.
For the full guidance on the Debt Relief Scheme, Click HERE