Breathing Space for tenants?

Breathing Space for tenants?

11:57 AM, 18th January 2021, About 7 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 Beaver

10:35 AM, 22nd January 2021, About 6 months ago

Reply to the comment left by RL at 22/01/2021 - 10:15
I think you make a really valid point: At what point is the landlord made aware of the tenant's mental health problems and how?

The landlord must be made aware of the tenants mental health problems by somebody at some point even if it's just a letter from the tenant or counsellor saying, "...I have [my client has] mental health problems and you cannot now contact me."

From that point onwards of course if the landlord is ever contacted by anybody for a reference on behalf of a tenant then the landlord will be obliged to pass on the facts: (1) We were notified that tenant has mental health problems on x date (2) Tenant didn't pay rent for x period (3) It took me X months or years to get the tenant out.

And under these draft regulations that will make the tenant extremely high risk, even compared to social housing tenants; that in turn will be the end of the tenant ever being able to rent in the private sector, except with landlords and agents who don't care about references...

So these tenants with "mental health problems" (and who hasn't got them right now? Many landlords have) will then be committed to the social housing sector.

No private sector landlord will want them.

It's going to keep the courts pretty busy as well isn't it? But that's fine, they're asking for more work aren't they?

by Steve Masters

10:38 AM, 22nd January 2021, About 6 months ago

Reply to the comment left by Anthony Hawes at 22/01/2021 - 10:23It's entirely possible the debtor (T) and the debt advisor will probably swerve both the original rent arrears and the obligation to pay continuing rent.
A normal breathing space will end after 60 and this will just add 2 months rent onto the existing arrears and add two months to the already extensively longthy eviction proceedings.
In the case of a mental health breathing space once T has run up 2 months rent during the breathing space, then LL can start a new S8 case for the new arrears but the original arrears will still likely be trapped inside the ongoing mental health breathing space for god knows how long. Well, at least this is how I assume it will work.

by Darren Peters

10:38 AM, 22nd January 2021, About 6 months ago

I wonder what level of specialist is required to diagnose mental health problems for the purposes of above. Ie is it a medical diagnosis or can any amateur assert such?

Eg is the equivalent of a doctor's sick note required as proof?

by DSR

11:19 AM, 22nd January 2021, About 6 months ago

Reply to the comment left by Steve Masters at 22/01/2021 - 10:38
I think the crux of this is to really understand the role of the debt councillor in all this and determine what their remit is. Surely it must be best from the outset for the councillor to approach the LL for a possible solution before any of the 'Breathing Space' (aptly shortened to BS ;0) is even considered!? It flies right in the face of the Baldrick type 'cunning plan', mediation stuff the courts bought back in swiftly to try and reduce the number of eviction cases. If the idea really is that there doesn't have to be any consultation with/ telling the LL BEFORE the BS is put in place, the only things left open to LL is to join the loooooooooooooooong eviction queue. AUGH!

by Steve Masters

11:37 AM, 22nd January 2021, About 6 months ago

Reply to the comment left by Darren Peters at 22/01/2021 - 10:38
It will take someone like an 'approved mental health professional' (AMHP) to certify a mental health condition. There is plenty of existing mental health law around this process.

by Steve Masters

11:40 AM, 22nd January 2021, About 6 months ago

Reply to the comment left by RL at 22/01/2021 - 11:19
I think the debt advisor will discuss potential debt repayment plans with the debtor first before they discuss with creditors.

by Luke P

11:56 AM, 22nd January 2021, About 6 months ago

Reply to the comment left by Steve Masters at 22/01/2021 - 10:38A moratorium should only be granted if they can both pay the ongoing rent *and* can create a repayment plan for the arrears (after the moratorium, of course). It isn’t supposed to delay the inevitable…though I’m not sure if £5/mo on a £2k arrears would be considered acceptable (I bet a Shelter/CAB debt advisor would think so). It strange, because after the Breathing Space ends, and even if they do have some sort of plan in place, if the LL isn’t happy about the amount/length of time it’ll take to clear the arrears, they are no longer prevented from serving a S.8. Though I suppose (unlike a S.21 which will soon be taken away), the Court decides the outcome and I suppose if they have an ‘official’ repayment plan arranged by their debt advisor, the Judge would deem this acceptable.

Actually, as I type and think, this is probably the plan all along…get rid of S.21, knowing all S.8’s need to go before the Courts. No problem as we all know the difficult tenants ultimately end up owing the requisite arrears for mandatory Grounds for Possession…BUT…the Judge refuses on the basis they’ve got a (pathetic) repayment plan in place…AND had the luxury of two months hassle-free.

by Mike

13:42 PM, 22nd January 2021, About 6 months ago

I would require extensive proof from a mental health professional, he or she must sign a letter and be responsible for correct diagnoses, if found to be colluding with a rogue tenant, we could sue the mental health professional or a medical professional, we could even challenge their decision if we think tenant is faking his or her illnesses, make it hard for them to just write a sick note without proper diagnoses, such that they could be sued if they diagnose wrong.

by Mike

13:48 PM, 22nd January 2021, About 6 months ago

Just as most insurance companies require medical evidence before payout,

by Luke P

13:51 PM, 22nd January 2021, About 6 months ago

Reply to the comment left by Mike at 22/01/2021 - 13:42
You don’t get to decide. The parameters are already set out in the legislation.


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