Debt Respite Scheme (Breathing Space) guidance for Landlords

breathing space

Written by Carly Fallon

Carly is a qualified solicitor with experience in regional and national law firms. She has a background in commercial property work and heads up LandlordSolicitors.com business development team.

May 13, 2021

New ‘Breathing Space’ rules launched.

On Wednesday 5 May 2021, the new Debt Respite Scheme, or ‘breathing space’ was introduced, in a bid to help tenants with problem debt.  

The scheme will provide legal protection for tenants (and other debtors), against prosecution, debt collectors and bailiffs for up to 60 days. Breathing space can be granted to tenants on ‘standards grounds’ or on ‘mental health grounds’. The latter being extended to 30-days following the end of the tenant’s treatment.

Many of us may be wondering about the rationale behind the scheme? And won’t an additional 60-days of non-payment serve to exacerbate the debt situation further? Apparently not. Only those who are considered to be able to pay off their debts are granted breathing space. Tenants given breathing space will gain access to support from a debt advice provider (authorised by the FCA to offer debt counselling) or a local authority advisor, to get a handle on their finances.

Threatening letters, notices of prosecution and/or eviction will be forbidden during this period to allow for financial planning to take place. There will be no interest or penalty charges during those 60 days, whilst the debtor works with experts to get their finances back on track. It is anticipated that some 700,000 people across England and Wales will apply for the scheme within the first year. A similar scheme is already in existence in Scotland.

No doubt this will have a huge impact on Landlords, who may themselves be classed as ‘struggling’ where they have not seen a rent payment in several months. We see countless landlords within the private rental sector who have already lost thousands on missed rent payments since the start of the pandemic. This may seem like an additional delay tactic for many who now risk losing their investment properties.

What does it mean for landlords?

During the breathing space period, landlords cannot serve a section 8 notice, (where the tenant is in rent arrears) neither can possession orders be granted. However, it is worth noting that landlords will be required to continue to pay mortgages during the breathing space period, as this is classed as secured lending. Where landlords are experiencing difficulties, they may wish to speak to their lender and explain the circumstances.

The NRLA have issued some useful guidance for landlords that have tenants who have entered a breathing space.

Landlords and letting agents must refrain from:

  • Contacting the tenant (in any way) regarding the outstanding debt;
  • Obtaining a warrant in relation to the outstanding debt;
  • Serve a section 8 notice (grounds 8, 10 & 11) but all other grounds are available;
  • Charge interest on the outstanding debt;
  • Apply for judgement in relation to the outstanding debt;
  • Enforce an existing money judgement for the outstanding debt;
  • Remove any of the tenant’s belongings from the property (or otherwise);
  • Requesting third party payments or deductions from Universal Credit or other benefits agencies; and
  • Commence bankruptcy proceedings.

Breathing space does not mean that landlords cannot attend to maintenance issues or other safety issues that do not relate to missed rent.

If you are concerned about how the breathing space scheme may affect you, then please contact us for a free initial consultation. We aim to offer you timely and useful advice to help with your tenancy issues.

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