Breathing Space for tenants?

Breathing Space for tenants?

11:57 AM, 18th January 2021, About 5 months ago 54

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This needs a broader audience for sure. The stand out ‘features’ of this draft legislation are that it doesn’t include secured debt (well of course it wouldn’t) and they’re obviously expecting the mental health orders to go on for lengthy periods (which they quite easily could) as the legislation allows for review…every FIVE years!

This is insane! The Draft Legislation is here: https://www.legislation.gov.uk/ukdsi/2020/9780348209976/contents

Luke

Breathing Space: New rules will give tenants a ‘break’ from debt

A new scheme being brought in this spring will ban banks and landlords from chasing tenants for unpaid debts, by offering them a period of time to try to find a solution to their financial problems.

The Debt Respite Scheme (also known as Breathing Space) will come into force in May 4 and, while the scheme was created with larger lenders in mind, it will impact on landlords – particularly those seeking possession due to arrears.

There are two types of breathing space that a tenant may enter into:

  • a standard breathing space and
  • a mental health crisis breathing space.

For the most part, both types of breathing space operate in the same way. Creditors are not allowed to contact them directly to request payment of the debt, or take enforcement action to recover the debt (including by taking possession of a property).

However, the duration and frequency of the breathing spaces vary. A ‘standard’ arrangement will last for a maximum of 60 days, for a mental health crisis breathing space, the Breathing Space ends 30 days after the tenant’s treatment ends.

Who decides?

Local authorities providing debt advice and FCA approved debt advisors can grant Breathing Spaces to people in debt – they would be expected to speak to them the establish whether this is the best thing for them.

If they were in a position to pay off  the money they owe through proper budgeting or selling things, then a Breathing Space may not be deemed the right solution for them.

If a Breathing Space is thought to be the most appropriate way forward, their name will be added to an electronic record and their creditors will be notified, although the decision can be challenged.

Impact on Section 8 possessions

For most landlords, this will usually occur where the tenant is in arrears. In these cases they cannot serve a Section 8 notice, apply for a warrant or money judgement or receive a possession order during the Breathing Space. They should also not contact the tenant to request payment of the debt during this time.

If there are judgements against former tenants for damage to the property or other unpaid bills, then this will also be covered if they enter a Beathing Space.

It is worth noting that secured debts aren’t covered by Breathing Space rules , so your mortgage lender would still expect to receive mortgage payments during the period your tenant was in their tenant is in a Breathing Space. However it is likely you would be able to come to an arrangement should you explain the situation.

Once notified that your tenant has entered into a breathing space you, or your agent, must not do any of the following until the breathing space has ended: 

  • Contact the tenant directly in relation to the debt
  • Obtain a warrant in relation to the debt
  • Serve a notice seeking possession because of the debt
  • Sell on the debt to a third party
  • Charge interest on the debt over the period covered by the breathing space
  • Apply for a judgement in relation to the debt
  • Enforce an existing money judgement for the debt
  • Take control of the tenant’s belongings during the breathing space
  • Request third party deductions from Universal Credit or other benefits
  • Start bankruptcy proceedings

You may continue to contact your tenant about anything not related to the debt. For example, arranging repairs or inspections for electrical or gas safety checks. In addition to this, if the tenant has asked to talk to you about a debt solution or debt then you can answer these enquiries.

More information

For more detailed information on tenants’ eligibility criteria, compliance, FAQs and best practice visit our Breathing Spaces guide here.

The National Residential Landlords Association has said where a tenant is in arrears:

“Landlords cannot serve a Section 8 notice, apply for a warrant or money judgement or receive a possession order during the breathing space. They should also not contact the tenant to request payment of the debt during this time.”

“It is worth noting that secured debts aren’t covered by breathing space rules, so your mortgage lender would still expect to receive mortgage payments during the period your tenant was in their tenant is in a breathing space. However, it is likely you would be able to come to an arrangement should you explain the situation.”

“You may continue to contact your tenant about anything not related to the debt. For example, arranging repairs or inspections for electrical or gas safety checks. In addition to this, if the tenant has asked to talk to you about a debt solution or debt then you can answer these enquiries.”



Comments

by Gromit

12:44 PM, 18th January 2021, About 5 months ago

Rogue tenants will be jumping for joy as the Govrrnment has just added a nuclear weapon to their armoury of legislation they can use against Landlords to avoid eviction.
All they have to do is feign mental illness (underpants on their heads an a pencil up each nostril ala Blackadder), and they can stay rent free for as long as they want, and not be hassled by their Landlord.

by David Price

13:06 PM, 18th January 2021, About 5 months ago

Time to sell my house and rent from an unsuspecting landlord.

by DGM

14:09 PM, 18th January 2021, About 5 months ago

This is a crazy idea, so can a landlord then use this against the mortgage company as it will give a lot of landlords mental health issues when they can't pay the mortgage as the tenants feign illness, which will happen.

by D Roberts

14:16 PM, 18th January 2021, About 5 months ago

If you have a guarantor for the rent, could you proceed against them?

by Luke P

14:23 PM, 18th January 2021, About 5 months ago

Reply to the comment left by DGM at 18/01/2021 - 14:09
No, because it doesn’t apply to secured debt.

by Beaver

14:26 PM, 18th January 2021, About 5 months ago

Suppose you have been renting your property out to tenants but need to get it back in order for a member of your family to move into it as their principle private residence, but the tenant is in debt to you.

Are you still able to get your property back?

by Carol

15:05 PM, 18th January 2021, About 5 months ago

Yet another way for Government to try and bankrupt landlords and avoid taking responsibility. I'm already selling some of my properties and more will follow.

by Luke P

15:08 PM, 18th January 2021, About 5 months ago

Reply to the comment left by Beaver at 18/01/2021 - 14:26
I guess the question is whether the Scheme precludes the use of Section 8 Notices entirely, or just Ground 8…?

by Jon Landlord

15:46 PM, 18th January 2021, About 5 months ago

Reply to the comment left by Luke P at 18/01/2021 - 15:08
Grounds 8, 10 or 11 can't be used without a court's permission.

Specifically, Regulation 7(7)(j) lists the exclusion as: "serve a notice to take possession of a dwelling-house let to a debtor on grounds 8, 10 or 11 in Schedule 2 to the Housing Act 1988 or take possession of a dwelling-house let to a debtor having served such a notice".

by Old Mrs Landlord

15:59 PM, 18th January 2021, About 5 months ago

So in the event of a tenant being in a mental health crisis the landlord cannot make contact regarding the debt until 30 days after treatment has finished. Since health records are, quite rightly, confidential how can landlords know when they are allowed to approach the tenant? How many of these tenants are going to ring up their landlord and say "Hi, my treatment has finished now so in a month's time you can get in touch to arrange a debt repayment plan"? In any case, mental health services have waiting lists so it's likely to be a while before treatment even starts. If patients are discharged but need ongoing medication, can that be construed as being still in receipt of treatment? There are so many possible loopholes and pitfalls with this proposed legislation that it seems designed to leave landlords in a never-ending loop where they are responsible for all the costs while every possible resolution or exit route is blocked. I predict a record rise in mental health crises in the renting community (and I don't even own a crystal ball).

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