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 Beaver

13:54 PM, 22nd January 2021, About 6 months ago

Reply to the comment left by Mike at 22/01/2021 - 13:42
So presumably then even if the landlord cannot contact the tenant to ask about repayment of outstanding rents, the landlord *will* be able to contact the tenant or the tenant's professional representative for proof of the health problem?

And if this proof isn't provided then the landlord will be able to contact the tenant with respect to the outstanding rents?

And if the landlord has been provided with proof then when asked for references by another landlord the landlord will either have to:

(1) Refuse to provide references, or
(2) Disclose the fact that the tenant has mental health problems.

by Steve Masters

13:54 PM, 22nd January 2021, About 6 months ago

Reply to the comment left by Mike at 22/01/2021 - 13:42
As I said before, there is plenty of existing mental health law. This is taken very seriously because the consequence of diagnosis can often involve deprivation of liberty of some form.

There are very strict procedures to follow, nothing like just issuing a sick note.

by Mike

13:58 PM, 22nd January 2021, About 6 months ago

Also as the legislation changes, we must also change our terms and conditions on our tenancy agreement that we will require a proof from a proper medical professional who is authorised to diagnose mental health disorders if should a tenant suffer from any form if mental health problems preventing him or her from paying her rent, failing which the landlord will not accept just simple form of notification. Otherwise landlord will serve a section 8 notice and start eviction proceedings.
We must cut iron with iron. So without evidence, dismiss any such move.

by Beaver

14:01 PM, 22nd January 2021, About 6 months ago

Reply to the comment left by Mike at 22/01/2021 - 13:58
Even if we added this to our tenancy agreements, do we actually think that our landlord's insurance would cover us to provide accommodation for tenants with mental health problems? Or do you think the premiums would go up such that we'd have to raise the rent to further reduce the risk?

Surely the insurance company would need some kind of reference saying that the tenant was capable of looking after the property and wasn't likely to trash it.

by Mike

14:29 PM, 22nd January 2021, About 6 months ago

We should also add on out terms and conditions that we have the right to seek tenants medical condition from our own idependent nominated medical professional just as insurance companies require, so as to rule out any unproprofessionalism , or fake illness, and tenant must not decline to attend a specialist clinic.

by Mike

14:31 PM, 22nd January 2021, About 6 months ago

We should also add on out terms and conditions that we have the right to seek tenants medical condition from our own idependent nominated medical professional just as insurance companies require, so as to rule out any unprofrssionalusm, or fake illness. Yes we too need breathing space.

by Beaver

14:41 PM, 22nd January 2021, About 6 months ago

Reply to the comment left by Mike at 22/01/2021 - 14:29
I can't be the only landlord with tenants whose bins are always full of empty spirits bottles and who already do a lot of damage to the property.

Do we have any idea whether the term mental illness and this new legislation also covers people with drug or alcohol addiction problems?

by Mike

14:59 PM, 22nd January 2021, About 6 months ago

Certainly the parlimentalist are mental for sure to propose this type of legislation.

As for insurance companies who may offer landlords rent guarantee cover against this sickness , the premiums would obviously go up to cover additional risk, yes the competition among such companies would mean they may well offer this in their package at additional cost, rather than not they risk.lising business

by Mike

15:03 PM, 22nd January 2021, About 6 months ago

Sorry for my bad typing as I am using my Samsung phone with a tiny keyboard and I have big fat fingers, which is why some words appear out of this universe

by Luke P

15:22 PM, 22nd January 2021, About 6 months ago

Reply to the comment left by Mike at 22/01/2021 - 15:03
There’s actually no penalty for breaking the order to not contact them. The only thing that would be deemed invalid would be any attempt to issue/progress a S.8 (Grounds 8, 10 & 11).


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