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Rent Arrears and Breathing Space Regulations

From Robert Ulph on April 9, 2021

New regulations come into force next month and it could have implications for landlords with tenants who have rent arrears.

The Debt Respite Scheme (Breathing Space) Regulations in England and Wales mean that from 4th May, letting agents and landlords could be blocked from charging late fees, compounding interest on missing rent, and taking any enforcement action over debts.

This new piece of legislation was approved by Parliament in October 2020 to give breathing space to anyone committed to addressing their debt through a Financial Conduct Authority (FCA)-authorised debt advisor or the tenant’s local authority. During this period, the person in debt cannot be chased for repayment or charged interest and fees on what they owe.

It’s important to understand the different types of debt moratoriums covered by the legislation and the fact that your tenants could be affected by either. A standard ‘breathing space’ can be instigated once every 12 months by an FCA-authorised debt advisor or the tenant’s local authority, giving the tenant legal protections from creditor action for up to 60 days. This includes pausing enforcement actions from creditors while freezing most interest and charges on the debt.

The second is a mental health crisis ‘breathing space’. This is only available if a tenant is receiving mental health crisis treatment and lasts as long as the treatment, plus 30 days. This version also has stronger debt protection measures and there are no limits to how many times such a ‘breathing space’ can be triggered.

While it’s clear that both types of ‘breathing spaces’ pause repayments and prevent additional debt from piling up, this new law also has implications for tenant communications. It’s important to ensure that anything you do send the tenant during their ‘breathing space’ can’t be read as asking them to pay their debts.

According to the Government guidance on these new regulations, creditors may only contact an indebted tenant during their ‘breathing space’ over certain debt-related issues. This includes issues such as ongoing liabilities, to respond to their queries or if they request to talk about a breathing space debt or a debt solution. However, you are allowed to contact the tenant’s debt advisor about any amounts owed or to discuss a debt solution.

I would also remind that the current situation and these regulations are not a green light for tenants to assume that they can simply stop paying their rent as this could have long-term implications for their landlord and on the future of their rental.

For landlords I would advise seeking professional advice. At Pennington we can advise what can be arranged so that both tenants and landlord come through this uncertain time in the best way. So as always if you need advice on this or anything else on the local property market, please call me as I am always happy to help.