As we emerge from the Covid-19 pandemic there are many tenants, and others, with substantial debts. In some of these cases where an individual has a source of income, or will gain one, that can be used to pay the debts off in time, it may be possible for them to apply for a Debt Moratorium, which could continue to limit the actions that landlord can take in respect of any arrears for a further 60 days.
Any person who is in debt can seek a debt moratorium from an Approved Debt Advice Provider. If the moratorium is granted, it will be registered in an online database maintained by the Secretary of State.
The process is intended to facilitate debt rescheduling, rather than limit repayment. In order to secure a Debt Moratorium, the Debtor must reasonably satisfy the Debt Advice Provider that:
They will be able to pay their debts in full if given the breathing space to do so. The moratoriums are not available to simply delay the inevitable. There must be evidence that the debt can and will be cleared.
They will be able to prevent their debt position getting worse during the moratorium.
During a moratorium a debtor/tenant has the following protections in place:
They cannot be contacted to seek payment of the debt subject to the moratorium
They cannot be asked to pay any part of that debt, any interest on it or any fee or cost created by it.
They cannot be served with a section 8 notice citing one of the three grounds for possession for arrears (grounds 8, 10 and 11) or the equivalent notices in Wales under the Renting Homes (Wales) Act 2016 (when it comes into force).
A possession order cannot be sought on the basis of the debt covered by the moratorium and, if a possession order has already been obtained on that basis, it cannot be enforced.
No legal action in a court can be taken against a person on the strength of a moratorium debt. This would seem to protect licensees and non-Housing Act tenants too.
Interest and penalties that accrue in respect of a moratorium debt during the moratorium period cannot be sought and so are lost to the creditor/landlord.
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 any tenant benefitting from it must continue to pay their rent for their main home as further payments fall due. Failure to make those payments would allow a Landlord to apply to the relevant Debt Advice Organisation for cancellation of the moratorium and, if they decline, to apply to the Court for the moratorium to be ended.
There are further moratorium provisions for people suffering a mental health crisis. These are far more extensive and 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 while this is resolved. If these are granted the debtor will be allowed 30 days from when their crisis is deemed to be at an end.
It is likely that a significant number of landlords will find themselves with tenants seeking moratoriums. Where the pandemic has caused a temporary reduction in income then it may be that tenant will be in a position where they can meet their rental payments going forwards but need more time to pay off the arrears. To keep the landlords in control of this process it may be better to agree a repayment schedule with the tenant directly and record it in an enforceable way, rather than have repayment delayed further by the moratorium process.
The knowledge that these regulations are coming though may also motivate some landlords to issue notices and proceedings to try and remove tenants before they avail themselves of a moratorium. It may also drive an increase in the issue of section 21 notices (for as long as they remain available) as these will not be restricted by a debt moratorium.
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