Under the scheme (also known as the ‘Debt Respite’ scheme) the tenant will only be eligible for a breathing space if:
- they are unable or unlikely to be able to repay all or part of their debt; and
- it is ‘appropriate’ to allow them a breathing space.
The rules of the scheme differ depending on whether the individual only has a debt problem or is also receiving treatment for mental health problems.
Individuals must apply to an authorised debt advisor for an assessment of whether they are eligible for a breathing space under the scheme. If they are, the ‘standard’ breathing space lasts for 60 days. Evidence from an approved mental health professional can be used to apply for a mental health crisis breathing space, which lasts until 30 days after the treatment ends.
An individual will not be eligible if they already have a debt relief order, an individual voluntary arrangement or an interim order in place, or they are an undischarged bankrupt. Nor are they eligible if they have already been granted a 60-day breathing space in the last 12 months.
The effect of the breathing space is that creditors, including landlords, cannot enforce any sums due at the date the breathing space starts (including interest, fees, penalties or charges) until it has ended. The landlord must not contact the individual about collecting or enforcing the debt during the breathing space.
However, an individual benefiting from the 60-day breathing space must continue to meet ongoing liabilities, such as rent other than arrears, and utility or fuel charges. – The breathing space only applies to arrears already incurred at the start of the breathing space.
Landlords are allowed to:
- speak to the debt adviser who assessed the individual to discuss solutions;
- apply to the advisor for a review of their assessment within 20 days; or
- apply to court within 50 days for a review if they do not agree with the assessment.
Landlords will be notified by the Insolvency Service if a tenant has been assessed as eligible for a breathing space, and when it ends so they can start enforcing their debt again.
The new rules do not prevent landlords taking action to recover possession if a tenant is not in a breathing space. However, where landlords (or their agents or solicitors) are entitled to serve notice to recover possession, the notice must include information about the Breathing Space scheme. A new ‘Section 8 Notice’ was prescribed for these purposes from 4 May 2021.
The scheme also applies to other forms of debt and creditor, not just arrears of rent and landlords.
- Landlords should review their arrears recovery processes setting out what they will do if a tenant becomes entitled to a breathing space, and take professional advice if uncertain what their options are.
- Read government guidance for creditors on the Debt Respite Scheme.
This article from Atom Content Marketing is for general guidance only, for businesses in the United Kingdom governed by the laws of England. Atom Content Marketing, expert contributors and ICAEW (as distributor) disclaim all liability for any errors or omissions.
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