Breathing Space Regulations and the issues surrounding them are part of a wider proposal to rewrite the management of consumer debt. In 2021, the Debt Moratorium came into force. Whereby, any person who is in debt could seek help from an approved debt advice provider. Creditors cannot take any action against their debtors for monies that are owed to them under this moratorium. It puts a delay on the payment of debts or obligations owed by a debtor. In short, no proceedings can be made against someone whilst they are involved within a Breathing Space.
New Debt Repayment Plan on the Horizon
The government is now proposing a new consultation known as the Statutory Debt Repayment Plan (SDRP). This will make limited changes to the Breathing Space Scheme but will largely create a new regime alongside this. The aim of the SDRP is to allow a person in debt to consolidate their debts and repay them under a single statutory agreement and a single payment. The time frame for this is ten years. The debtor is granted protection from any creditor action within that period. The main objective of the SDRP is to enable consumers to take control of their finances and escape problem debts, whilst still returning the money owed to creditors. SDRP is due in 2024.
What Debt Qualifies for the Statutory Debt Repayment Plan?
The SDRP will include a broad range of debts, including debts owed to the government and to creditors outside of financial services. This will freeze any interest and fees accumulated by the debt whilst it is being repaid. Non-eligible debts will be secured debts, such as administered fines and student loans. There are also discretionary debts that are non-eligible, such as housing debts.
This means that although housing debts can be included within the repayment plan, a consumer may choose not to do so. Chiefly, because this will lengthen the period over which rent arrears are paid. This could lead to several issues such as the landlord potentially being unable to renew the tenancy. However, the policy’s intent is for as wide a range of debts as possible to be included within the plan.
What this New Plan Means for Landlords Dealing with Rent Arrears
Landlords need to be particularly aware that they would be unable to obtain possession on rent arrears grounds. But only if the arrears are included in a plan. Because of Renters Reform Bill changes and the abolishing of Section 21, landlords should be seeking legal advice when trying to recover possession so they are clear on all of their options. The court system is still far from adequate, and it would be disastrous for a landlord to wait months for an eagerly awaited hearing date to find that they can no longer rely on the grounds for possession. Resulting in wasted months with potentially no rent incoming. The incoming changes are a complete shakeup of the current system. Therefore, it is imperative legal advice is sought to help landlords navigate those changes.
Anyone can fall into financial difficulty at any point, but agents and landlords are still advised to reference tenants thoroughly and conduct adequate checks to vet any potential tenants. Landlords are also encouraged to explore insurance products to ensure that they are sufficiently protected for peace of mind. It has never been so important for all industry professionals to pool together to guide landlords through these significant changes.
By Cara Wiltshire, Legal Assistant at Woodstock Legal Services