Zoe Conroy looks at the impacts that the new form of possession notice and the breathing space rules have on the processes landlords must follow to recover possession of their properties from tenants.
New regulations came in to force in May this year introducing debt breathing space moratoriums and modifying the form for notices seeking possession (NSPs) under section 8 of the Housing Act 1988. These are the notices social landlords can use to begin the process of seeking possession of assured tenancies in reliance on the grounds set out in Schedule 2 of the Housing Act 1988.
The Assured Tenancies and Agricultural Occupancies (Forms) (Moratorium Debt) (Consequential Amendment) (England) Regulations 2021 amended their predecessor regulations from 2015 and were laid on Friday 30 April 2021, coming into force the next business day (Tuesday 4 May 2021, the Monday being a bank holiday).
The new NSP form (Form 3) can be found at: https://www.gov.uk/guidance/assured-tenancy-forms.
The timing of the regulations and the date they came into force being so soon after means that notices using the old form sent on either Thursday 29 or Friday 30 April 2021 that would be deemed served on or after Tuesday 4 May 2021 (for example, any served on either of those dates by first-class post) will be invalid as the new form is required from Tuesday 4 May 2021 onwards. If this is the case, then a new notice on the new correct form must be used to avoid dealing with proceedings issued in reliance on an invalid NSP.
The new NSP form refers to “breathing space”, which is why the form of notice was amended.
What is breathing space?
Debt breathing spaces and moratoriums were introduced by the Debt Respite Scheme (Breathing Space Moratorium and Mental Health Crisis Moratorium) (England and Wales) Regulations 2020, also on 4 May 2021.
The scheme provides “breathing space”, essentially a moratorium on debt collection and related action, for those owing a debt (debtors), including rent arrears, by those due a debt (creditors).
There are two types of “breathing space”:
- a standard breathing space for debtors who are actively seeking advice from an authorised debt advisor – for 60 days; and
- a mental health breathing space for debtors receiving mental health crisis treatment – for as long as their treatment lasts plus 30 days.
To qualify for a breathing space the debtor must:
- be an individual;
- owe a qualifying debt that they cannot or will be unlikely to be able to repay all or some of;
- live in England or Wales;
- not be subject to some specific debt-related orders currently;
- not be bankrupt; and
- not have had a standard breathing space in the previous 12 months or be benefiting from a breathing space currently.
Examples of qualifying debts include rent and service charge arrears. Landlords therefore need to consider these regulations carefully and plan processes for dealing with breathing space. So far as we can tell from what has been published so far, there is no exemption or exception for debts owed to social landlords or by tenants of social housing. It should also be noted that universal credit advances do not qualify as qualifying debts for the purpose of breathing spaces.
Breathing spaces are not payment holidays, so live rent and service charges, plus any previously agreed payment plans for debts, must continue to be paid during the breathing space moratorium. So, while these debts cannot be enforced, they can continue to accrue or even be reduced.
You may be wondering if these new rules affording breathing spaces for those with serious debts or receiving mental health crisis treatment have been laid in response to those struggling from the impacts of Covid-19; but the scheme was actually a commitment in the 2017 Conservative Party manifesto and was already planned for introduction in 2021 prior to the pandemic.
How is a breathing space started and is its existence recorded?
Both standard and mental health breathing spaces can only be started by a debt adviser offering debt counselling (authorised by the Financial Conduct Authority) or a local authority (where they advise their residents on debt) where they deem a breathing space to be appropriate. The debtor’s details will then be added to the new “breathing space register” which will not be available to the public. The breathing space will begin the day after the details are placed on this register and thereafter landlords (or their agents) will be notified and the breathing space must then be respected.
The electronic service will send you a notification to tell you about each debt owed to you in a breathing space and the date the breathing space started. This notification may be sent electronically, by post or delivered by hand to your address. The regulations consider that you have received an electronic notification on the day it was sent, a postal notification four business days after posting and a notification left at your address on the same day it was left.
How do breathing spaces affect claims for possession and what practical steps should be taken to ensure compliance?
The most important thing to note is that if a landlord proceeds with recovery action during the breathing space then it will be ineffective and the landlord could become liable for the tenant’s legal costs of sorting it out.
Landlords should use the following five Rs to plan their approach to ensure compliance with the regulations. As soon notification of a breathing space is received:
1. Record the notification
Do this on the customer database (or equivalent) immediately, detailing which debts it relates to (it may apply to rent only and not repairs recharges for example) and calculate and note how long the breathing space will last for.
2. Report the notification
It is important for landlords to tell anyone working with them in relation to this tenant and their debts – this will include agents and solicitors. If proceedings are underway, the solicitors should notify the court and any solicitors acting on behalf of the tenant.
3. Review the current position
It is vital to check what stage of recovery action is at and suspend all action to recover the debt (whatever stage this action is at) as it must be halted or not started for the duration of the breathing space. This includes eviction by bailiffs or High Court enforcement officers if a possession order has already been obtained. However, if an attachment of earnings order has been obtained (to receive payment of a debt direct from the debtor’s wages), this will not be affected by a breathing space.
4. Resist contacting the tenant
This is in relation to the debt and potentially otherwise; landlords should seek advice depending on what they wish to contact the tenant about.
5. Request a review
Within 20 days of being notified of the breathing space, if the landlord considers that it will be unfairly prejudiced by it, the landlord can request a review by the debt adviser of the decision to begin the breathing space. For standard breathing spaces landlords can also request a review if the debtor does not meet the eligibility criteria, if the debt is not eligible for a breathing space or if the landlord considers that the tenant has sufficient financial resources to pay the debt.
In addition, landlords are prevented from applying any interest or late payment fees to the breathing space debts during the breathing space.
Zoe Conroy is a solicitor in the housing and regeneration team at Brabners
