This month the advice line were able to help one of our members with a question relating to the Breathing Space legislation that is coming into force in May this year.
This legislation, its full name being The Debt Respite Scheme (Breathing Space Moratorium and Mental Health Crisis Moratorium) (England and Wales) Regulations 2020, or the Breathing Space regs for short, introduces the concept of a Breathing Space.
This is essentially a moratorium on lenders seeking repayment of qualifying debts that are covered by the breathing space, in the hopes that during this time a debt solution can be put in place with the debtor, and give them enough time to be able to resolve their financial problems. Whilst it is primarily aimed at banks and other large lenders, landlords are caught up in this as well.
Our member wanted to know how this legislation might impact them as a landlord and what advice we may have at this time.
Our advice
Firstly, its important to acknowledge that there are two types of breathing space, and both will be quite rare for landlords to encounter.
Tenants would be placed into a 'breathing space' on the decision of an FCA qualified debt advisor who believes the tenant has a good chance of getting control over their financial situation and repaying their debts. In that regard, it could be good for landlords.
This is a standard breathing space, that someone is put into as a result of having a certain level of qualified debt and that the debt advisor believes could benefit from being given time to sort it out.
There is also a Mental Health Crisis Breathing Space, which not only requires the debt advisor approving it and the level of debt, but also that the debtor has been detained under the Mental Health Act, or moved under similar police powers, or is receiving crisis, emergency or acute care in hospital or the community or a specialist mental health service.
Whilst in a breathing space moratorium, the tenant doesn’t have to repay the debts that they have, including already accrued rent arrears.
Landlords also can’t take action relating to that debt, or even contact the tenant about it.
In a standard breathing space, landlords can expect the ongoing rent payment per month since entering into a breathing space to be met, and the debtor should try to do so, as not meeting this could have them taken out of the breathing space.
In a mental health crisis breathing space, the debtor doesn’t have to meet this.
A standard breathing space lasts for up to 60 days and is reviewed in the middle and can only happen once in 12 months.
A mental health crisis breathing space ends 30 days after the tenants treatment, and could happen more than once per year.
The best thing we can advise our member does to protect themselves is to have a guarantor in place, as there is no prevention on seeking repayment of the debt, the rent arrears, from the guarantor.
Another concern is that whilst the tenant is in a breathing space moratorium, you can’t seek to recover the debt that is within the moratorium, and also can’t take possession action that is based on that debt.
This would be a section 8 notice with grounds 8 10 and 11 included. It wouldn’t cover a section 8 notice on other grounds, or a section 21 notice. So in terms of possession action, landlords do still have some options available.
- To read the NRLA’s guidance on breathing space legislation, click here.
- Click here to read a blog written by the NRLA’s Legal Counsel, David Smith, about Breathing Space.