More woe for landlords? Will the Breathing Space scheme make a difference?
On the 4 May 2021, the Government’s Debt Respite Scheme (Breathing Space) comes into force.
The intention behind the scheme is to assist and protect debtors who are in difficulties and cannot pay their creditors.
The scheme applies to all creditors, including landlords so if you are a landlord you need to be aware that the provisions may apply to you.
What is a “breathing space”?
There are 2 types of breathing space:
- Standard – available to anyone with problem debt
- Mental health crisis – available only to someone receiving mental health crisis treatment
How long is the breathing space?
Up to 60 days for the standard breathing space and, in respect of the mental health breathing space, as long as the mental health treatment lasts plus an additional 30 days.
How is a breathing space initiated?
A standard breathing space can only be started by seeking debt advice from a debt advisor authorised by the Financial Conduct Authority (FCA) and that advisor considering that one is appropriate. Various criteria must be met, and it is not a foregone conclusion that the advisor will agree that a breathing space is appropriate.
A mental health crisis breathing space is started by an approved mental health professional
When does a breathing space start?
The day after the debtor’s details are put on the breathing spaces register.
Once on the register (overseen by the Insolvency Service) an electronic, or postal, notification will be sent out and, if you receive one, the protections need to be put in place.
What are the protections?
If you receive notification, you must:
- Stop charging any interest, fees, penalties, or charges for the debt
- Stop any enforcement or recovery action you are taking
- Not contact the debtor to request payment of the debt (without permission of the court)
The scheme provides some protection to vulnerable debtors if they can prove their case to an advisor.
It does not stop the debt being due and once the breathing space has concluded action can be reinstated.
During the breathing space, rent will continue to be payable; it is just the arrears which you cannot take action in respect of.
The protection is temporary. Some landlords may be concerned that tenants will use it as a further means to delay payment. In certain cases that may be true, but tenants are not automatically qualify for a breathing space and it is still to be seen to what extent tenants will be able to benefit from the scheme.
More detail can be found here