Breathing Space for tenants?

Breathing Space for tenants?

11:57 AM, 18th January 2021, About 11 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 Darren Peters

16:04 PM, 18th January 2021, About 11 months ago

Reply to the comment left by DGM at 18/01/2021 - 14:09
DGM No the mortgage is a secured debt. You are stuck between a rock and a hard place. No rent in but mortgage must still be paid.

All this new anti-landlord legislation, it's beginning to look like it's no coincidence 😉

by DSR

16:36 PM, 18th January 2021, About 11 months ago

So shall we all issue S8's now (citing every issue possible not just debt) then wait for this to get to court? If we all do before May 4th to beat the deadline, that will tie up the concern of being able to do it later?
While it stated this is DRAFT legislation, is still stays will come into effect on 4th May?????

by DSR

16:43 PM, 18th January 2021, About 11 months ago

Who initiates this - presumable the tenant has to go to the council or an FCA approved debt advisor off their own back, then a decision is made there and then between them? Would it not be pertinent for the LL to be contacted at this point also not only for input but to understand their own position? Isn't this even considered??
If the LL has no idea that the tenant initiates this and the debt people don't contact the LL either, how are we supposed to know?

by TheBiggerPicture

16:46 PM, 18th January 2021, About 11 months ago

Ha!
So, lets forget that this makes a mockery of contract law and the basis of our society.
Lets also forget that mental health is not a normal criteria for transference of wealth. (i.e, I can't make a claim against you or anybody because I am mentally unwell).
Assuming those two things were actually ok, this does nothing for mental health and is absurdum and it is completely unbalanced.
UNBALANCED
As I understand it, when the tenants are doing fine, but the landlord is struggling mentally, the tenant is not required to pay more rent than legally contracted.
This is clearly an unbalanced and unfair relationship.
MENTAL HEALTH SMOKESCREEN
But also these rules, will cause more landlords to have mental health issues. Where is the plan to remedy this? If the justification for the undermining of law was to improve peoples health, why not be consistent? The only conclusion can be this is not about mental health, or this is a magnitude of ineptness not seen in decades.
It seems this is really about picking winners and losers or taking a liability off the Governments books.
Its clear who the patsy is, and as always the patsy will sit there thinking it can't get any worse and do nothing.

Some people say democracy is 3 wolves and a sheep deciding who to eat for lunch. Except in this case the wolves are calling the sheep a wolf!!

by Beaver

17:10 PM, 18th January 2021, About 11 months ago

Reply to the comment left by Old Mrs Landlord at 18/01/2021 - 15:59
I agree with this: I know somebody who recently approached the NHS for a mental health referral and the waiting list was two years.

by LANDLORD 35

19:12 PM, 18th January 2021, About 11 months ago

Does this apply to housing associations and councils?

by Steve Masters

19:34 PM, 18th January 2021, About 11 months ago

Rent is an ongoing liability and should be met. Debtors should add more than £500 to their debts during a breathing space, however, during a standard breathing space:
"Where a debtor does not pay an ongoing liability, the debt adviser might decide to cancel the standard breathing space. The debt adviser will consider whether cancelling it is unfair or unreasonable to the debtor. This can be done as part of the midway review process. This obligation and review process does not apply to debtors during a mental health crisis breathing space."
1. ) Could a debt advisor consider eviction proceedings "unfair or unreasonable to the debtor" as it might result in them losing their home and thus decide not cancel the breathing space and let debts increase further?
2.) What if the debt advisor considers the debtor doesn't have the means to pay his "ongoing liabilities" ie rent? Will this allow the debtor to add to his debt and continue in the breathing space?
3.) If the debtor does make payment to the creditor during a breathing space, will that payment be applied to the original debt or to any "ongoing liabilities"? ie to ongoing rent or previous rent arrears?
4.) Does the debtor have obligations to meet "ongoing liabilities" in a mental health breathing space?
5.) Can a creditor ask for a mental health breathing space review if "ongoing liabilities" are not met?

This act is a minefield for landlords!

by TinaShoebb

22:01 PM, 18th January 2021, About 11 months ago

So this is the most recent version
https://www.legislation.gov.uk/uksi/2020/1311/contents/made

It has already been approved - there are no further parliamentary procedures needed - and it will come into force in May.

As others have said, it is another tool in the scammers arsenal. It will just mean that landlords will be even less likely to rent to borderline tenants.

by Mike

2:42 AM, 19th January 2021, About 11 months ago

Perhaps we could call our tenants and ask how is your mental health now? if we cannot talk about rent or debts, we could ask how is your brain function coping, when did you visit a doctor or a psychiatrist, it looks like I am also going mental and who writes or proposes such policies must have been suffering from mental disorder, please think again, or see a psychiatrist before coming up with such idiotic policies. .

by Mick Roberts

9:07 AM, 19th January 2021, About 11 months ago

This tells me that Landlords are now gonna' be discriminating against people with Mental Health difficulties. Again having the opposite effect of getting us to take disabled people.
I've got several disabled people now, several Mental Health people, I'm gonna' think twice going forward.


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