Introducing the Debt Respite Scheme – and what it means for Residential Landlords.

The Debt Respite Scheme (Breathing Space Moratorium and Mental Health Crisis Moratorium)(England and Wales) regulations is due to come into force on 4th May 2021. The scheme allows a debtor to apply for “breathing space” if they have qualifying debts that they are unlikely to be able to repay. The scheme provides individuals with legal protections from creditor action while they receive debt advice.

Debtors can only access a breathing space by seeking debt advice from a debt adviser. Although all applications must be considered, the debt adviser may decide that a breathing space is not appropriate for a debtor.

There are two types of breathing space provisions: a standard breathing space and a mental health crisis breathing space and each type is very different from the other.

A standard breathing space is available to anyone with debt problems and gives them legal protections from creditor action for up to 60 days.

A mental health crisis breathing space is only available to someone who is receiving mental health crisis treatment and this provision has stronger protections. This breathing space will last as long as the person’s mental health crisis treatment lasts plus 30 days (no matter how long the crisis treatment lasts).

If a residential landlord is notified that their tenant has been awarded a breathing space in relation to his/her qualifying debt, then under the new regulations, the landlord must not take steps to pursue or enforce that debt. This would include serving a notice seeking possession on grounds of rent arrears, starting possession proceedings in the court, obtaining a warrant or taking steps to enforce an already obtained judgment.

If there is a guarantor then the landlord can still pursue them for payment of a debt otherwise excluded as a “breathing space debt” (unless the guarantor themselves qualify for breathing space in their own right).

A breathing space is not a payment holiday. While a creditor cannot enforce a “breathing space debt” during a breathing space period or charge interest or fees on it, a debtor is still legally required to pay their ongoing debts and liabilities as and when they arise.

In these unprecedented times, it is all the more important for landlords to seek professional help and as always, it is advisable to speak with a professional to ensure the most cost-effective route is pursued.

Also note that business debts and other types of debts are not covered under this scheme and anyone wanting to use the provisions of this scheme should also seek proper advice.

Article by Rossanna Yarleque

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