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No free ride for tenants in arrears despite new Breathing Spaces - lawyer

A leading property lawyer insists that a controversial new ‘debt moratorium’ system starting this spring will not mean a free ride for defaulting tenants.

David Smith, a partner in the litigation team at JMW Solicitors, says that from May 4 landlords - in common with others owed money by individuals living in England and Wales - will have to respect so-called Breathing Spaces for individuals in significant debt. 

The new Debt Respite Scheme - also known as Breathing Space - will give someone with 'problem debt' the right to legal protections from being chased up by creditors. As this applies to the rental sector, it is likely to protect tenants from being chased up by landlords or their letting agents. 

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The new details as set out on the Gov.uk website say there will be two types of breathing space - a standard breathing space and a mental health crisis breathing space. 

“During a [breathing space] a debtor or tenant in arrears cannot be contacted to seek payment of the debt subject to the moratorium and cannot be asked to pay any part of that debt, any interest on it or any fee or cost created by it” says Smith. 

“They also cannot be served with a section 8 notice citing one of the three grounds for possession for arrears (grounds 8, 10 and 11) or the equivalent notices in Wales under the Renting Homes (Wales) Act 2016 (when it comes into force).”

But Smith insists it does not mean landlords are powerless against an individual who successfully invokes a breathing space. 

“A section 21 notice can still be served and enforced against a tenant subject to a moratorium and so can a section 8 notice citing grounds other than arrears of rent. In addition, it is an absolute requirement of a debt moratorium that a tenant benefitting from it continues to pay their rent for their main home” he states.

“Failure to comply with the obligations of a debt moratorium, such as ongoing rent payment, permits a landlord to apply to the relevant debt advice organisation for cancellation of the moratorium and if they decline, to the courts to ask for the moratorium to be ended or to permit legal action for eviction on the grounds of arrears to progress. 

“However, the main factor that will also lead to this not being offered in all that many cases is that there must be an overall ability to actually clear the debts. A moratorium is not there to simply delay the inevitable.”

 

 

Under the new legislation a standard breathing space is available to any individual with problem debt and gives them legal protections from creditor action for up to 60 days. 

“The protections include pausing most enforcement action and contact from creditors and freezing most interest and charges on their debts” says the government guidance.

Individuals can access this standard breathing space - which the government states “is not a payment holiday” - only through an approved debt adviser registered with the Financial Conduct Authority, or via a local authority if it is approved to offer this kind of advice to its residents. 

An individual who applies for such a ‘space’ can get no more than one a year.

A mental health crisis breathing space is only available to a client who is receiving recognised mental health crisis treatment. 

If an approved mental health professional certifies a client is in mental health crisis treatment, the client or someone else might ask for a mental health crisis breathing space on the client's behalf. 

The mental health crisis breathing space has some stronger protections than the standard breathing space. It lasts as long as the client's mental health crisis treatment, plus 30 additional days thereafter, no matter how long the crisis treatment lasts.

If you’re a creditor - that is, a landlord with arrears owed - and if you’re told that a debt owed to you is in a breathing space, you must stop all action related to that debt and apply the protections. 

These protections must stay in place until the breathing space ends.

In addition, if you receive a notification of a breathing space debt that you have sold to another creditor - so for example, you may have sold your buy to let property to another investor or owner occupier - you must tell that creditor the breathing space has started and give their contact details to the debt adviser.

“If you do not do this as soon as possible, you’re liable for any losses the debtor or the assigned creditor have as a result” says the government advice.

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    We don't want tenants with any form of mental health issues then.

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    Don't know how you can identify them so your comment is a bit abbrasive.

     
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    I reply to Retired Agent One, perhaps it would be better to say that we do not want tenants who for any reason may not be able to pay the rent. One such category is all tenants with mental health problems.
    As to identifying such tenants they vary often come with some sort of mentor and what is wrong with asking for a medical report? The government has imposed this regime and we must counter it by whatever means are available to us.

     
  • David Lester

    If this is the new law, when carrying-out Due diligence, can we ask for history (proof) of any mental history?
    Likewise can you refuse a candidate for having mental history?
    A joint tenancy, if one claims mental problems, can you pursue the other?
    If there is a Guarantor, can they be pursued for rent arrears?
    Can a CCJ be issued during the Breathing Space?

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    We can refuse any tenant, we don't have to give a reason, in the case of a joint tenancy I can see no reason why we cannot go after the other tenant or the guarantor, however as I understand things we cannot issue a CCJ on the person with the breathing space, we will have to see how things pan out after May and be very careful with new tenants.

     
    PossessionFriendUK PossessionFriend

    No David, no formal action of any kind during a Moratorium. [ CCJ's ]
    The way to go for this and a number of other regulations impacting landlords ( including the imminent abolishment of Sec 21 ) is to insist on a suitable Guarantor.
    There will be a number of tenants ( some good ) that won't be able to provide a Guarantor and they will suffer from the effects of this 'Debtors Charter.'

     
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    You cannot pursue the other (joint) tenant when one has a moratorium.

     
    Fredy Jones

    The garantor could use breathing space law indefinitely.

    How long does it take to evict long term non paying tenants now? Is it possible to get an accelerated case before May deadline when breathing space law comes in? If the tenants were not paying before cv19 they should be ahead in the backlog when the courts reopen?

     
  • George Dawes

    Definitely , keep them where they belong

    The House of Lords

  • PossessionFriendUK PossessionFriend

    Sorry to have to respectfully disagree with David Smith ( ' must be an overall ability to actually clear the debts. A moratorium is not there to simply delay the inevitable. ' )

    The purpose of the moratorium is to allow the Debt Advisors to come up with a plan. There are limited options, which either write off ALL the debt or a large majority 80% of it, via IVA, DRO or Bankrupcy.
    Nowhere, but nowhere in the entire legislation is the criteria for a moratorium, that the debtor must be able to repay the debt.

    In fact, virtually none of them are able or likely to. and one of the grounds for granting a Moratorium, Section 24(4)(a) is that the debtor is 'unlikely to be able to pay some or all of the debt.' ! ( and I have pointed this out to David Smith. )

    The consolation of being able to use Sec 21 ( which won't be around for long, ) or some other of the less frequently used grounds is NOT helpful for landlords with severe Tenant arrears.

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    This is wrong from DS. The legislation makes absolutely clear that the 60 days is to help the debtor pursue an avenue for dealing with their debt issue, not one of which is ‘full repayment of outstanding debt’ - only discount plans and promises are offered. The MH BS is worse, with no pursuit allowed until 1 month after the end of treatment. Imagine the length of time that could be!

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    There will be companies marketing themselves to do this with three free mental health therapy sessions inc.
    you only need to do one session and that will qualify you to shirk it for a year

    Fredy Jones

    Longer than a year

    The garantor could use breathing space law indefinitely.

    How long does it take to evict long term non paying tenants now? Is it possible to get an accelerated case before May deadline when breathing space law comes in? If the tenants were not paying before cv19 they should be ahead in the backlog when the courts reopen?

     
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    The question to ask is ‘Are you or are you intending to apply for a ‘breathing space moratorium’ then insisting on a home owning guarantor anyway.
    This will hurt a lot of innocent tenants. It’s not good for their future record and it loads the rent and criteria yet again. Whoever has pushed this through in Whitehall will have a special place in hell for what they have instigated.

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    Agreed, this will hurt the genuine tenant who cannot come up with a suitable guarantor

     
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    All such leftie dogma hurts decent tenants and protects the rogues.

    Pity the decent tenants don't realise how much they are harmed by all the leftie claptrap!

     
  • Robert Evans

    Right....so you have an existing tenant that then gets a MHBS. Does this mean they could then live in your property for ever, rent free as long as they have a mental health condition?

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    But a condition of this breathing space is that future payments are made on time and in full, many grey areas , I think going forward there will be many cases tested in court.

     
  • Robert Evans

    Right....so you have an existing tenant that then gets a MHBS. Does this mean they could then live in your property for ever, rent free as long as they have a mental health condition?

  • Fredy Jones

    How long does it take to evict non paying tenants now? Is it possible to get an accelerated case before May deadline when breathing space law comes in?

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    I expect we will go back to the 80s & 90s where there were other forms of eviction.

     
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    Too blo*dy long in any situation.

    Fredy Jones

    Some say it will take years to get through the backlog

     
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    Outrageous and unfair.

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    I don't see any Breathing Space for landlords or provisions for Landlords with Mental Health problems caused by Tenant not paying the Rent. I suppose its not possible for us to be considered Human when we are already Labeled Rogue Criminal Landlords and never referred to in any other way, are the Editors not allowed to not even once print a headline commending good LL's.


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