Debt Respite Scheme

A significant challenge that people have faced as a result of the Covid-19 pandemic is changes to their financial situation and rising debt. For this reason, the government has announced a new scheme designed to offer certain protections to debtors. It is called the Debt Respite Scheme (Breathing Space), and it comes into force on 4th May 2021.

The scheme is relevant for anyone who owes, or is owed, money. For residential landlords and tenants it is particularly relevant in relation to the landlord’s ability to recover rent arrears and gain possession of a property on the grounds of unpaid rent.

The scheme essentially allows someone in debt to apply for a “breathing space”. The scheme is designed to give debtors relief from being chased while realistic and practical arrangements are made for the debt to be paid.

The debtor must first seek advice from a properly qualified debt advisor and, if they are eligible for a breathing space, this will be started by the advisor. The creditor will receive formal notification when a breathing space has started.

There are two types of breathing space;

  • a standard breathing space which may last for up to 60 days
  • a mental health crisis breathing space

This is available for people receiving mental health crisis treatment. It lasts as long as the debtor is in crisis, plus an additional 30 days after treatment ends.

During the breathing space the creditor must not take any action to enforce the debt;

  • if court action has commenced, you must notify the court and put the proceedings on hold
  • if an enforcement agent has been instructed to take action in respect of the debt then you must notify them and stop that action
  • interest must not accrue on a debt within the breathing space

This also means landlords cannot serve an s8 notice while a relevant breathing space is in place. They also cannot contact the tenant to pursue the rent arrears, start court proceedings, or do anything to pursue and enforce the debt.

However, this does not mean that the debt is erased, or that the debtor is not expected to pay rent during the breathing space. Rent is treated is an ongoing liability within the regulations and should continue to be paid, if possible. Indeed, a breathing space may be cancelled if a debtor does not pay an ongoing liability or comply with their obligations while it is in place. However, rent arrears accrued before the breathing space cannot be pursued while it is in force.

The regulations are part of the government’s ongoing response to the Covid-19 pandemic, and it remains to be seen how they will be taken up and used. There are provisions within the regulations for breathing spaces to be reviewed before the 60 day mark, and the onus is initially on the debtor to seek formal debt advice and arrange for a breathing space to be set up. However, once a landlord receive notification of a breathing space they will need to be very careful about complying with the regulations in full, and making sure that all the necessary protections provided by the breathing space are in place.

If you need advice on this or any other landlord and tenant issues then please contact Fiona Hannaford on call her on 01803 403403.

 

 

The content of this article is correct as at the date of posting and is for information purposes only. Whilst we try and ensure it is accurate we do not warrant or guarantee that this is the case, nor do we accept any responsibility in the event that it is relied on. The information is not intended to be a substitute for legal advice which you are recommended to obtain.

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