Debt Respite Scheme

Update 20/08/2021

According to the government's latest insolvency report, 17,297 people registered for the scheme between May 4th this year when it was launched. It is uncertain if the Breathing Space scheme has been used for rent arrears as it can cover many things from council tax arrears, utility bills and personal loans.

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Tenant debt and Landlord expenses have been a heavy talking point and the situation has inflamed more through a series of changing COVID restrictions, lockdown after lockdown and uturn decision making from the government. Now legislation is being drafted into effect on the 4th of May 2021 which will completely tie the hands of landlords who are facing the issue of non paying tenants.

The Debt Respite Scheme (Breathing Space), once taken effect it will enable eligible applicants to pause most enforcement actions and stop all contact methods for creditors while freezing interest on debt. In standard cases the ‘breathing space’ will be limited to 60 days while those who can claim a ‘mental health crisis’ there is no limit on time as long as they can prove their situation is the same.

To qualify for the scheme a client must go through a debt advice provider as:

• As an individual
• Show qualifying debt to a creditor
• Live or usually reside in England or Wales

There are 2 types of breathing spaces available:

A standard breathing space which offers protection up to 60 days from any creditor action

A mental health crisis which is only available to those who are receiving treatment from an approved mental health professional (AMHP) who is willing to certify the client. This protection has no limits and will be extended by 30 days after treatment no matter the duration of the treatment.

To read the full guidance and details given to money advisers visit The Insolvency Service page here

The National Residential Landlords Association (NRLA) has stated:

“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.”

For landlords who are already concerned about the government's plan to abolish the Section 21 process this has now made a Section 8 path to repossession more volatile.  With more and more tenants and landlords both being put into financial trouble as the country records record unemployment with 1.69 million people currently unemployed as of October 2020 with an unemployment rate of 4.9% according to the Office for National Statistics

The result of any approval of a tenant entering the breathing space means immediately landlords and their agents cannot do any of the following until the breathing space has ended:

• As an individual
• Show qualifying debt to a creditor
• Live or usually reside in England or Wales
• 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 dedications from Universal Credit or other benefits
• Start bankruptcy proceedings

Source NRLA Guidance

Discussion around the new legislation is picking up and there is sure to be resistance to it’s enforcement. We will release an update both here and on our social media when any developments happen.