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Guide to debt moratoriums

Posted on 12th May 2021 in Property Litigation, Affordable Housing

Posted by

Leah Skelley

Guide to debt moratoriums

The Debt Respite Scheme (Breathing Space Moratorium and Mental Health Crisis Moratorium) (England and Wales) Regulations 2020, or the 2020 Regulations for short, came into force on 4 May 2021.


What are debt moratoriums?

The 2020 Regulations apply to most debts accrued before or after 4 May 2021, including arrears of rent, whether that be due to benefits being used for something other than housing, there is an issue with a tenant’s benefits claim or a temporary reduction in income caused by Covid-19.

There are further moratorium provisions for people suffering a mental health crisis. These are far more powerful but require a certified mental health professional to confirm that the debtor is suffering a mental health crisis and that they need to be protected from their debts on a temporary basis whilst this is resolved.

During the existence of the moratorium the 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. You also cannot retrospectively apply interest, fees, penalties or charges to the moratorium debt in question.

Tenants also cannot be served with a section 8 notice citing grounds 8, 10 or 11 or the equivalent notices in Wales. You must let the court or tribunal know of the breathing space if existing legal proceedings are afoot.

A possession order, if already obtained, cannot be enforced by a Bailiff or High Court Enforcement Order.

For more information on debt moratoriums, please see the dedicated Government guidance.


Who can apply for a debt moratorium?

Any person who is in debt can seek a debt moratorium from an approved debt advice provider. If granted, it must be registered with a computer system maintained on behalf of the Secretary of State.

A moratorium is not something that is given freely. In order to obtain one a debtor must reasonably satisfy the debt advice provider that they:

  1. Will be able to pay their debts in full if they are given the breathing space created by the debt moratorium; and
  2. They will be able to prevent their debt position getting worse during the moratorium.

You will be notified by the Insolvency Service if any of your tenants enters (or exits) a moratorium. We recommend that you opt in through the electronic service.

Once you have received a notification about a breathing space debt, you are allowed to see any information on the breathing space register about the debtor or tenant. You will only be able to see information relating to the debt owed to you and not, for example, any other debt owned to another creditor by the same tenant.


How long does a moratorium last for?

Debt moratoriums last for 60 days from the date it is started, or when the court or debt adviser cancels it.

Mental health crisis moratoriums can last as long as the debtor receives treatment (no matter how long this treatment lasts), plus an additional 30 days thereafter.


How does this impact section 8 notices?

There is no new information to be inserted on the form but you should be alert to the following:

  1. Any section 8 notice served on or after 29 April 2021 by post will not be in the new prescribed form by the time it reaches the recipient and will have to be re-served in the new Form 3.
  2. If a moratorium is in place, you cannot serve a section 8 notice on a tenant in relation to a moratorium debt on grounds 8, 10 or 11 of Schedule 2 (with or without other grounds) without the permission of the county court or any other court or tribunal where legal proceedings concerning the debt have been or could be issued or started.


How does this impact section 21 notices?

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.

It is also an absolute requirement of a debt moratorium that a tenant benefitting from it continues to pay their ongoing liabilities, such as their rent, where they have the means to do so. Failure to comply with the obligations of a debt moratorium permits you to apply to the relevant debt 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.

Further, an eligible tenant can only apply for one standard breathing space each year where this relates to the debt only. For mental health crisis moratoriums, there is no limit on the number of times individuals receiving mental health treatment can apply for a breathing space each year.


Find out more

For further help or information about anything mentioned in this article, or to talk to one of our dedicated  team, please contact our legal experts.

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