Breathing Space for tenants
Introduced on 4th May, the new Debt Respite Scheme, also known as ‘Breathing Space’, could have a significant impact on residential landlords considering possession proceedings to recoup rent arrears. So, what do registered providers (RPs) need to be aware of and what steps must they now take when considering bringing legal proceedings against tenants?
Implemented to give those facing debt problems protection from their creditors, the Debt Respite Scheme includes two types of Breathing Spaces; Standard Breathing Space and Mental Health Crisis Breathing Space. Standard Breathing Space is available to anyone with problem debt and provides an individual with legal protection from creditor action for up to 60 days. This includes most enforcement action being paused, the prevention of contact from creditors and the freezing of most interest charges on the debt.
The Mental Health Crisis Breathing Space is only available to a person receiving mental health crisis treatment, with protection lasting as long as the individual’s treatment lasts, plus 30 days after their treatment ends.
For landlords, the changes introduced by the Debt Respite Scheme could introduce further delays to their repayments, exacerbating the financial impact of pandemic-related rent arrears. If a tenant who is in rent arrears is granted Breathing Space, their landlord is prevented from beginning legal proceedings against them. This includes serving them with a ‘Notice Seeking Possession’, pursuing a possession order, or applying for a warrant for possession. It also prevents landlords from obtaining or enforcing a money judgment, contacting the tenant to request payment(s) towards their debt, or applying for third party deductions from any benefits the tenant may be receiving, unless the landlord has permission from the court.
If a tenant applies for Breathing Space after their landlord has already begun legal proceedings against them, the landlord will not be able to enforce proceedings unless they get special permission from the court or tribunal to continue. Additionally, if the Breathing Space results in a pause in the proceedings and the time limit for enforcement, or in new claims relating to the claim running out during the Breathing Space, this time will be extended to eight weeks after the Breathing Space ends.
While tenants should simply not view the Breathing Space as a payment holiday, they still have a duty to pay ongoing liabilities, if they can whilst a Breathing Space is in place. One of the ongoing liabilities would be monthly rent, but not the arrears which have accrued up to the start of the Breathing Space.
As part of the standard Breathing Space, the debt adviser must also complete a midway review between 25 days and 35 days, to ensure that the tenant is complying with their obligations. There is no midway review for a Mental Health Breathing Space, as this continues as long as their treatment plan is in place.
In light of the Debt Respite Scheme, it’s vital that housing associations tread carefully and take steps to try and understand their tenants’ position, including whether they have a Breathing Space in place, before attempting to commence any legal proceedings against them.
Ultimately, the new rules will require RPs to consider any impacts on their timescales, and adapt their tenancy management policies and procedures accordingly. This should include putting measures in place to ensure that any legal proceedings underway are put on hold, the courts are clearly notified at the right time and that a careful note is taken of all key dates. This is especially important if they need to rely on the eight-week extension period for a Notice Seeking Possession.
Once a Breathing Space is in place, it’s also crucial that housing associations do not contact their tenant to chase outstanding debts via any means, including emails and texts. Breaching this rule could result in any action taken being null and void and the landlord may be liable for the tenant’s costs.
One positive of the Debt Respite Scheme for the marketplace is its potential to unlock improved landlord-tenant relationships. For example, by making an effort to really listen to tenants and learn about their personal and financial situations, RPs could uncover ways to collaborate with them and put in place more innovative money management arrangements. This could prove to be a win-win situation for both parties, improving the likelihood of housing associations receiving rental payments, while reducing the chance of tenants getting into more debt.
While the Debt Respite Scheme will be welcomed by tenants struggling with the financial impact of the pandemic, it could exacerbate the cashflow woes of RPs who have been unable to pursue them for rental arrears. By developing a strong awareness of the new rules, listening to tenants about their situations and working with them moving forwards, it may be possible for housing associations to adapt to the new rules, while improving long-term landlord-tenant relationships.
Habib Khan, solicitor and property disputes specialist at law firm, Shakespeare Martineau