When is Rent Arrears not Arrears? When it is a Moratorium Debt!

From 4 May 2021 landlords, in common with others owed money by individuals living in England and Wales will need to consider the effect of debt moratoriums. The new Debt Respite Scheme (Breathing Space Moratorium and Mental Health Crisis Moratorium) (England and Wales) Regulations 2020 come into force as from 4 May 2021 and will apply to most debts accrued before or after that date include arrears of rent. Any person who is in debt can seek a debt moratorium from an approved debt advice provider.

David Smith, partner in the commercial litigation team at JMW Solicitors says, “During a moratorium a 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. They also 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).”

David continues, “However, this is not a free ride for defaulting tenants. 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. In addition, it is an absolute requirement of a debt moratorium that a tenant benefitting from it continues to pay their rent for their main home. Failure to comply with the obligations of a debt moratorium, such as ongoing rent payment, permits a landlord to apply to the relevant debt advice 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 to progress. However, the main factor that will also lead to this not being offered in all that many cases is that there must be an overall ability to actually clear the debts. A moratorium is not there to simply delay the inevitable.”