Breathing Space Moratorium and Mental Health Crisis Moratorium
The Breathing Space Moratorium and Mental Health Crisis Moratorium (England and Wales) Regulations 2020 were approved by Parliament in October 2020. It will pause enforcement action from creditors, such as letting agents and landlords, and freezing charges, fees and certain interest on qualifying debts for up to 60 days. There is also an alternative way into the scheme for people receiving mental health crisis treatment. A mental health crisis moratorium lasts as long as a person’s mental health crisis treatment, plus 30 days.
Access to the Debt Respite Scheme
A Breathing Space moratorium can only be accessed once every 12 months, but there is no limit to the number of times that an individual can enter a mental health crisis moratorium.
Who can start a breathing space?
A Breathing Space can only be started by a debt advice provider who is authorised by the Financial Conduct Authority (FCA) to offer debt counselling or local authority (where they provide debt advice to residents).
The impact on letting agents and landlords
From 4 May 2021, when letting agents, landlords, and other creditors are notified about a moratorium debt, they must pause enforcement action and freeze charges, fees and certain interest for the duration of the moratorium. Agents must also conduct a reasonable search of their records for any additional debt(s) owed to them by the debtor, as they may be eligible to be added to the moratorium. Creditors must decide what constitutes a reasonable search, based on their circumstances.
Ahead of the scheme’s commencement on 4 May 2021, the UK Government announced that landlords should consider whether they need to make any changes to their systems and processes to comply with the regulations.
The scheme provides a temporary period of respite from creditor (e.g. landlord/letting agent) action to help people in problem debt (e.g. tenant) consider their options and engage with professional debt advice. The Scheme came into force on 4 May 2021, but qualifying debts can include any that the debtor had before the legislation started.