These new regulations were passed on 17th November 2020 and will commence from 4 May 2021.
The purpose of the regulations is to help people who have got into debt. While this will include those who have rent arrears, the legislation is much wider and also covers individuals owing money to mobile phone providers, mortgage lenders, utility companies and others. This ‘breathing space’ is designed to give time to the debtor to organise their financial affairs and get advice about how to deal with their debt. It is absolutely not a way of avoiding liability as full rental for the rental period under the tenancy agreement will still be payable.
The standard ‘breathing space’ will run for 60 days. The moratorium will stop the agent pursuing the arrears and will also prevent enforcement through serving a section 8 notice, making a court application, and even prevent the courts having a hearing and the bailiff enforcing a judgement. Where a court application has already been made the creditor must notify the court of the grant of the ‘breathing space’.
A tenant having ‘breathing space’ in place technically it does not prevent a section 21, but care should be taken if the motivation for the section 21 is the debt because the courts could rule that the tenants have a ‘breathing space’ agreement and this needs to be taken into account and action can not be taken. Also if there are joint debtors with only one with a ‘breathing space’ agreement action can not be taken against the other debtor even if they have no ‘breathing space’ agreement in place. To be clear this does not include actions carried out before the ‘breathing space’, for example a section 8 for rent arrears, it simply introduces a delay before moving to the next step. On notification of the ‘breathing space’ the creditor should check that the debt declared to the debt advisor covers all debts from the individual and notify the debt advisor of any discrepancy. A tenant can not have another ‘standard breathing space’ if they have had one within the last 12 months
Who is eligible? For a debtor to qualify for the ‘breathing space’ they must first visit a Financial Conduct Authority approved debt advisor or a local authority that provides debt advice. The debt advisor will then use their discretion to decide if they debtor is eligible for a ‘breathing space’. There are some eligibility requirements that are listed in the legislation and are not open for discussion:
One main point to note is that the debtor must be able to keep up with the payments. Therefore the breathing space should not leave anyone in greater debt than they were at the start. The guidance is clear, this is not a payment holiday and most of what would normally be due during the breathing space will still be owed.
Landlords and agents need to be aware that any late payments charges or interest are not chargeable during the breathing space.
If the tenant fails to keep up with the ongoing payments then the agent can ask for a review of the ‘breathing space’ with a view of having it revoked as the debtor is not complying with the conditions. A standard ‘breathing space’ is due to have a mid point review, between 25 and 35 days after is starts. If the debtor is not keeping up with payments it can then be revoked
If the tenant fails to keep up with the ongoing payments then the agent can ask for a review of the ‘breathing space’ with a view of having it revoked as the debtor is not complying with the conditions. A standard ‘breathing space’ is due to have a mid point review, between 25 and 35 days after is starts. If the debtor is not keeping up with payments it can then be revoked
The ‘breathing space’ is no more than a bridge to enable the debtor to work out a more long term solution to enable them to address their debts. During the ‘breathing space’ the debt advisor will work to see if they can handle the debt after the breathing space expires.
The ‘breathing space’ is designed to ease the pressure on the tenant and therefore if the tenant is granted a breathing space by a relevant individual then landlord or agent cannot contact the tenant about the rent arrears or any associated charges during the ‘breathing space’. Having said that it doesn’t stop the agent from contacting the tenant on the grounds of repairs or renewal as long as it is nothing to do with the rent debts. If on the other hand the tenant approaches the Landlord or agent to discuss the debt that is permitted. Given that agents and landlords are not permitted to contact the tenant about the debt this includes automated over due rent emails and automated interest on over due rent.
Note
The ‘breathing space’ is designed to ease the pressure on the tenant and therefore if the tenant is granted a breathing space by a relevant individual then landlord or agent cannot contact the tenant about the rent arrears or any associated charges during the ‘breathing space’.
Mental health breathing space is slightly different. They are dependent on a mental health crisis, usually involving the admission of the individual to some form of care. The medical professional treating the individual has to request the ‘breathing space’ and it can last last as long as the crisis plus 30 days. This is extremely rare and would result in no payments needing to be made during the ‘mental health breathing space’. It requires agreement on the parts of the mental health professional and debt advisor.
For full details on the legislations click here
