A landlord’s guide to the government’s debt help scheme

The Debt Respite Scheme, also known as ‘breathing space’, provides tenants in financial difficulties with extra protection.

This article explains everything landlords need to know about the government debt scheme, from what to do if a tenant is given a breathing space, to how it could affect evictions.

What is breathing space?

The Debt Respite Scheme (Breathing Space Moratorium and Mental Health Crisis Moratorium)(England and Wales) Regulations was introduced in May 2021. It provides tenants in debt or suffering from mental health issues with protection from creditors such as landlords and letting agents.

The government debt scheme stops creditors from chasing or adding to debt for a defined period.

According to Mark Hayward, the Chief Policy Adviser at letting agency trade body ARLA Propertymark: “The changes introduced are to allow those struggling financially to have a limited time in which to seek advice and formulate a plan to move forward.”

He said the scheme will have a “large impact on processes followed by landlords when taking action against rent arrears.” Hayward added that it’s “hugely important that those dealing with rent debt are aware of the scheme and the changes in working” it has caused.

How does the government debt help scheme work?

A breathing space is a pause on debt enforcement action and communication made by creditors such as landlords. The scheme provides tenants with legal protection from landlords chasing arrears, so it’s important for you to comply.

The Debt Respite Scheme is in place in England and Wales, while in Scotland there is a Debt Arrangement Scheme.

Standard breathing space

A breathing space can last for up to 60 days. It provides the tenant with protection from landlords taking actions such as chasing rent arrears, adding interest to debt, or charging late payment fees.

A breathing space is available to tenants receiving debt advice from a provider that’s authorised by the Financial Conduct Authority (FCA) to offer debt counselling.

The Debt Respite Scheme is administered by the Insolvency Service, which reviews applications made on behalf of tenants by debt advice providers.

During a breathing space period, the debt advice provider will act as the point of contact for the tenant, landlord, and the Insolvency Service.

Mental health breathing space

Tenants can also apply for a mental health crisis breathing space. To qualify, they’ll need to meet the same criteria for a standard breathing space, but also be receiving mental health treatment when the application is made.

A mental health crisis breathing space can be started if an Approved Mental Health Professional (AMHP) certifies that someone is receiving mental health crisis treatment. This type of breathing space will last for the whole of the tenant’s treatment period, plus an extra 30 days.

The tenant receiving mental health treatment can apply directly to the debt adviser for a breathing space, or someone could apply on their behalf, such as:

What should landlords do if their tenant receives a breathing space?

When you’re told that one of your tenants has been given a breathing space, you’ll need to look through your records to find the details of the debt you’re owed.

What can’t you do?

• contact the tenant about the debt

• charge them late payment fees

• add interest to their existing rent arrears

• continue previous eviction action against the tenant

• start legal proceedings which relate to the tenant’s debt

What can you do?

• answer the tenant’s questions on their debt or rent arrears, such as how much they owe

• challenge the tenant’s application for a breathing space if, for example, you disagree with the amount of debt being protected

What else do you need to know?

Once the breathing space has started, the debt advice provider will carry out a review between day 25 and day 35. At this point, they’ll either cancel the breathing space or extend it for the full 60 days.

Any actions taken by a landlord during a breathing space that don’t comply with the regulations will be null and void. For example, if you charge a late fee or add interest to the tenant’s debt, it won’t count.

If you break the rules on a regular basis, you’ll get reminders from the Insolvency Service and could face action from a future regulator.

What’s expected of tenants with a breathing space?

Tenants are still expected to pay their rent and utilities bills during a breathing space. If they don’t, the period of debt help could be cancelled. However, they’re protected from paying back debt they’ve already built up.

For example, if their monthly rent is £1,500 and they’ve built up a combined debt of £3,000 through rent arrears, interest and late payment fees, they’ll have to pay the £1,500 each month but will be protected from paying back any of the £3,000 debt during the breathing space.

Tenants can only apply for a breathing space once in a 12-month rolling period, and they won’t be able to apply for help with their debts through the scheme if:

• they have an individual voluntary arrangement (IVA)

• they have a debt relief order (DRO)

• they are an undischarged bankrupt

Does the debt help scheme affect evictions?

Landlords are still able to seek possession of their property during a breathing space with a Section 21 notice, provided they’ve followed all the necessary steps.

You won’t be able to issue a Section 8 notice during this period if rent arrears are the grounds for eviction. However, you can serve a Section 8 notice if you’re seeking to evict the tenant on different grounds such as antisocial behaviour or property damage.

It’s also important to make sure that any Section 8 notices have been updated to include details of the Debt Respite Scheme or they may be invalid.

If you’ve had a court order issued against a tenant for a debt which then receives a breathing space, any action to enforce the court order must stop during this period.

For example, no hearings should take place and you can’t instruct an enforcement agent such as a bailiff to serve an order or warrant. In some circumstances, the court or tribunal may give you permission to continue action.

Any court order or judgements for a debt which were made before a breathing space can’t be enforced until it ends. If a time limit for enforcement expires during a breathing space, it will automatically be extended by eight weeks.

What happens after a breathing space?

At the end of a breathing space, you’re able to charge fees, interest, charges and penalties on the debt. However, you can’t backdate any costs which would have built up during the breathing space (unless allowed by a court).

From this point, you’re able to take enforcement action such as chasing late payments or organising a repayment plan. You can also start or continue legal proceedings related to the debt.

If the tenant has gone into a debt solution such as bankruptcy or a debt relief order, you won’t be able to take any action. The same applies if a formal agreement such as an individual voluntary arrangement has been made. This can be checked on the Individual Insolvency Register.

Support for landlords

The Debt Respite Scheme provides many tenants with much-needed protection when they are struggling financially. However, it’s another complex piece of legislation for landlords to understand, so it’s important you do your research and access support if you need it.

On top of the official government guidelines, landlords can access support with the Debt Respite Scheme through their letting agent, a local landlord organisation, or a national trade body such as the National Residential Landlords Association or the Landlords Guild.

Do you have an unanswered question about breathing space regulations? Ask us in the comments below.