Breathing Space for tenants?

Breathing Space for tenants?

11:57 AM, 18th January 2021, About 6 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 Anthony Hawes

9:18 AM, 19th January 2021, About 6 months ago

Reply to the comment left by Mick Roberts at 19/01/2021 - 09:07
Will they though? How can you know if somebody has mental health difficulties prior to accepting them as a tenant?

by Gromit

10:04 AM, 19th January 2021, About 6 months ago

Will Landlords introduce psychometric tests for prospective tenants? Will insurers require this before granting RGI?

by Mike

10:04 AM, 19th January 2021, About 6 months ago

Can we do the same to our tax and council tax demand notices? and to massive fines that Councils impose on landlords when things do go wrong with landlords such as not having a correct type of property license.

If a person has genuine mental breakdown capacity, or unable to cope with things and go about earning his or her money, they should seek Universal Credit and pay their frigging rent for sure, why pass on their mental problems on to landlords, it seems that our leaders are themselves going mental, pandemic is their usual excuse.

by Mick Roberts

10:36 AM, 19th January 2021, About 6 months ago

Reply to the comment left by Anthony Hawes at 19/01/2021 - 09:18
Yes if they don't come clean, or look to be on a good day, Landlord won't know.

by Beaver

10:44 AM, 19th January 2021, About 6 months ago

Reply to the comment left by Mike at 19/01/2021 - 10:04
Once again I don't think anybody thought this draft legislation through.

Renting to people on benefits is already high risk. This new proposed legislation makes renting to people with mental health problems exceptionally high risk for reasons that are obvious from this thread.

In order to avail themselves of this "breathing space" then tenants with mental health problems are inevitably going to disclose the fact that they have mental health problems. And that means that they cannot ever afford to ask for a reference from a landlord because the landlord will be obliged to pass that information on. So it seems to me that this will create short term problems for landlords who already have tenants with mental health problems and after that these tenants are destined for the social housing sector; because no private sector landlord can afford to take the risk of taking them on, unless he or she is being paid directly by the benefits people, and that of course is a minefield.

by Luke P

11:08 AM, 19th January 2021, About 6 months ago

Reply to the comment left by Mike at 19/01/2021 - 10:04
No. Council tax, Court fines, HMRC payments are all (naturally) excluded.

by David Price

12:24 PM, 19th January 2021, About 6 months ago

Can we ask all prospective tenants to prove that they have no mental health problems? Perhaps a certificate issued by their GP, or would this be infringing their "'uman rites"?

There is a military maxim
"Never interfere with the enemy when you can see he is making a mistake.".
Perhaps we should let the government make this massive mistake and take advantage of it to specifically exclude all Benefit tenants (Male and Female Shelter please note)?

I do so love it when I see HMG making the homeless situation worse while pretending to solve the problem.

by DSR

10:15 AM, 22nd January 2021, About 6 months ago

so let me get this straight. (a very simplistic example here)
You take on a tenant in good faith. They don't pay the rent, you chase for rent but just before you can legally issue a S8 (as you have to have 2 months arrears built up) they find a debt councillor person and an agreement is made to enter a 'breathing space'. (The LL at this point having no idea the tenant has done this). The LL cannot now make contact with the tenant about the debt (and presumably not with the debt councillor either due to DP issues) to find out what the plans are to address the existing rent debt, and presumable the rent debt also going forward? At what stage if any is the LL made aware of any of this?????
WTF????

by Steve Masters

10:22 AM, 22nd January 2021, About 6 months ago

Reply to the comment left by RL at 22/01/2021 - 10:15
The debt advisor will inform all the creditors the breathing space has been entered into and the creditors can no longer contact the debtor about the debt but they can contact the debt advisor.

by Anthony Hawes

10:23 AM, 22nd January 2021, About 6 months ago

Reply to the comment left by RL at 22/01/2021 - 10:15
Ah, yes, but isn't there something about you being able to appeal. That's bound to be a very simple and fair process. Really, nothing to worry about.


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