Debt Respite Scheme Regulations - another body blow for landlords

Many tenants have fallen into significant arrears of rent during the Coronavirus pandemic. Landlords are feeling the financial pain, and the restrictions that have prevented the early termination of leases has added to that pain.

And just as we start to emerge from the pandemic, along come the Debt Respite Scheme Regulations. These come into force from 4 May 2021. They will apply to most debts accrued before or after that date and will include rental debts.

An individual who is in debt can seek a debt moratorium from an approved debt advice provider. A moratorium is essentially an officially sanctioned ‘breathing space’.

The moratorium will freeze the debt and prevent any enforcement action from being taken.

The moratorium will not be approved lightly. The individual must reasonably satisfy the debt advice provider that they will be able to repay the debt in full if it is granted. The moratorium will run for 60 days.

What does the moratorium mean for landlords?

• The tenant cannot be chased for payment of the debt that is subject to the moratorium.
• The tenant cannot be asked to pay any part of the debt, any interest on it, or any fees or costs created by it.
• The tenant cannot be served with a Notice citing the arrears as grounds for possession.

A possession order cannot be sought against a tenant for the arrears that are subject to a debt moratorium. Where a possession order has already been obtained prior to the moratorium being granted, it cannot be enforced by a Bailiff or High Court Enforcement Officer.

Any interest or penalties that accrue in respect of a moratorium debt during the moratorium period cannot be claimed and so become a loss for the landlord.

The result of all of this is that landlords are likely to be motivated to issue notices and issue proceedings before the regulations come into force. It is expected that there will be a surge in the use of section 21 notices as the service of these notices will not be constrained by the new Regulations.

If you would like any advice in relation to landlord and tenant matters, please do not hesitate to contact our Family Law Department on 01242 574 244.