Breathing Space: A quick intro to the Debt Respite Scheme

Effective in England and Wales from 4 May 2021, this new scheme aims to help those with problem debt. It doesn’t cancel the debt and it isn’t a payment holiday, but it puts on hold any enforcement action and gives debtors ‘breathing space’ to find solutions.

Let’s take a quick look at how this affects landlords.

The basics

There are two types of breathing space:

Standard breathing space, which lasts for 60 days.
Mental health crisis breathing space, which lasts throughout treatment and for an additional 30 days.

The standard breathing space can only be initiated by an FCA authorised Debt Advisor or by a Local Authority which provides debt advice. Special provisions apply for those receiving mental health crisis treatment, and more info is available on the GOV.UK website.

What happens when a breathing space is granted?

Once granted, the breathing space will be registered by the Insolvency Service and any creditors informed. As a landlord experiencing rent arrears, you should be notified, either electronically or by post.

It’s at this point that:

All collection and enforcement action – by you or by your agent – must stop.
You cannot ask the tenant to pay interest, fees, penalties or charges for the debt during the Breathing Space.
You cannot contact the tenant to request payment of the debt without court permission.

But:

The tenant is still liable for the ongoing rent and arrears and should pay you if they can.
The tenant can reach out to you to discuss the issue.

Note that the breathing space does not change your responsibilities as a landlord. Maintenance and inspections should go ahead as normal, and you can contact the tenant to make arrangements.

What happens when a breathing space ends?

You’ll be notified. You can contact the tenant and start or continue any actions or legal proceedings.

Key questions and answers

Landlords have been reaching out to us to understand how the new scheme affects them. Here’s a selection of the questions they’ve been asking.

Section 8 proceedings are underway. What happens now?

In short, everything will be put on hold. You must write to the courts and let them know that a breathing space has been set up. You can withdraw or ask for a stay.

If I don’t think the tenant needs the breathing space, what can I do?

Within 20 days of the start of the breathing space, you can request a review. Give the debt advisor a written statement with your case and provide any supporting evidence you have.

What happens if a tenant stops paying ongoing rent because of the breathing space?

The debt advisor can cancel a breathing space if they believe the debtor is not complying with their obligations.

I’m trying to regain possession is there anything I can do?

No, not until the breathing space expires.

Is there any good news for landlords?

Although putting on hold your ability to take action for 60 days could seem harsh, there is logic in it. The Covid-19 situation has left a lot of good tenants with money worries. Those working with a debt advisor are trying to get back on track. The plan they develop with a debt advisor could see your rent paid regularly and ultimately avoid the possibility of an eviction.