8th
Feb 2021
A property lawyer states the highly controversial ‘debt moratorium’ system due to start in May, means that tenants who have accrued rental arrears will have to to pay back the rental arrears owed to landlords.
The partner of a solicitor’s litigation team said that as from May 4 landlords, along with other creditors owed money by people living in England and Wales, must follow the government’s ‘Breathing Space’ regulations and not harass debtors for outstanding monies.
The recently announced Debt Respite Scheme - also ‘branded’ as Breathing Space – gives any individuals with ‘problem debt' the legal right from being ‘harassed’ by creditors chasing up their debt; this of course applies to landlords and letting agents with tenants in rental arrears.
As previously reported the full details and implications of the Debt Respite Scheme are now available on the Gov.uk website which lists and explains the two types of breathing space – the standard breathing space and the mental health crisis breathing space.
The property lawyer said: “During a [breathing space] a debtor or tenant in arrears cannot be contacted to seek payment of the debt subject to the moratorium and cannot be asked to pay any part of that debt, any interest on it or any fee or cost created by it.
“They also cannot be served with a section 8 notice citing one of the three grounds for possession for arrears (grounds 8, 10 and 11) or the equivalent notices in Wales under the Renting Homes (Wales) Act 2016 (when it comes into force).”
The lawyer does maintain that landlords will still be able to take action against problem tenants who are granted a breathing space.
He explains: “A section 21 notice can still be served and enforced against a tenant subject to a moratorium and so can a section 8 notice citing grounds other than arrears of rent. In addition, it is an absolute requirement of a debt moratorium that a tenant benefitting from it continues to pay their rent for their main home.
“Failure to comply with the obligations of a debt moratorium, such as ongoing rent payment, permits a landlord to apply to the relevant debt advice organisation for cancellation of the moratorium and if they decline, to the courts to ask for the moratorium to be ended or to permit legal action for eviction on the grounds of arrears to progress.
“However, the main factor that will also lead to this not being offered in all that many cases is that there must be an overall ability to actually clear the debts. A moratorium is not there to simply delay the inevitable.”
Under the new regulations anyone who has ‘problem debt’ can apply for the standard breathing space and if granted cannot be contacted by creditors for up to sixty days.
The government guidance says: “The protections include pausing most enforcement action and contact from creditors and freezing most interest and charges on their debts”.
The government does state that the breathing space “is not a payment holiday” and must be applied for an individual by an approved debt adviser registered with the Financial Conduct Authority, or through an approved local authority able to offer the relevant debt advice and support to its residents.
Any person that is granted the standard breathing space can only remain in the Debt Retention scheme for no longer than one year.
Individuals applying for the mental health crisis breathing space must be undergoing recognised mental health crisis treatment.
Upon receipt of the necessary mental professional certification stating that a person is undergoing a mental health crisis treatment, the person or someone acting on their behalf should be awarded the breathing space; this offers protection from creditors for as long as the treatment is ongoing plus an additional 30 days.
If landlord is a creditor and their tenants is granted a breathing space then they are unable to chase up outstanding rent until the term has concluded.
If any landlord receives a notification of a breathing space debt which has in effect been sold onto another creditor when selling a BTL property onto another landlord or private owner, then they must inform the new ‘creditor of the breathing space’s’ start date and pass their contact information onto the debt adviser acting on behalf of the tenant.
The government guidelines warns: “If you do not do this as soon as possible, you’re liable for any losses the debtor or the assigned creditor have as a result”.
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