As of 4th May 2021, the Debt Respite Scheme (Breathing Space) comes into force, affording those with problem debt the right to legal protections from their creditors. There are two types of breathing space: a standard breathing space and a mental health crisis 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
Will rent arrears be included in the Debt Respite Scheme?
Debts included in a breathing space must be qualifying debts. Debts are any sum of money owed by the debtor, while liabilities are any obligation on the debtor to pay money they are obliged to pay. Most debts are likely to be qualifying debts and therefore this will include rent arrears.
Once a breathing space has started, enforcement actions cannot be taken against the tenant or any co-tenants who are jointly liable with them for the rent arrears (the breathing space debt).
What this means for letting agents
If a tenant has started a breathing space, during this time you will not be able to:
- contact the tenant about their rent arrears or other debts.
- try to collect rent arrears, including where this is done by any third party you’ve appointed.
- serve notice to take possession of the property (either via S.8 or S.21) on the grounds of any rent arrears accrued up to the start of the breathing space
- take possession of the property during the breathing space even if a possession notice has been served prior to the start of the breathing space
- try to enforce a judgment or order issued by a court or tribunal (even if issued before the breathing space) without the court’s permission.
- obtain a warrant or writ
- get or seek a liability order
- start any action or legal proceedings (including bankruptcy petitions) against the tenant
- make an application for a default judgment for a claim for money against the tenant
You will only be able to contact the tenant in the following circumstances:
- about anything not related to the breathing space debt, e.g. ongoing liability to continue paying rent for the remainder of the tenancy term (but not regarding rent arrears accrued),
- arranging maintenance of the property
- if the tenant contacts you about their breathing space debt or a debt solution
- to respond to a query or complaint from the tenant
- about any action or legal proceedings a court or tribunal have allowed
- if you are required to contact the tenant under the Consumer Credit Act 1974 or by the FCA Handbook
In summary, letting agents and landlords will still be able to contact tenants about non-debt related matters, for example relating to the maintenance of the property. You can also respond to a tenant who has specifically contacted you about their debt. It is clear, however, that letting agents and landlords will not be permitted to instigate contact, actively chase or take any action to collect unpaid debts or enforce eviction whilst a breathing space is in place for that debt.
For the full guidance on the Debt Relief Scheme, Click HERE
WEBINAR: Understanding the Debt Relief Scheme (Breathing Space)
This month our partners Ashley Taylors Legal will be holding a webinar detailing the ‘dos and don’ts’ of the Government Debt relief scheme (Breathing Space) and what this means for the lettings industry. Spaces are limited so be sure to book your place as soon as possible:
Wednesday 21st April at 11:00am