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Debt Respite Scheme: a landlord’s obligations when a moratorium has been granted

Posted: 01/06/2021


Not only was 4 May Star Wars Day this year, it was also the day The Debt Respite Scheme (Breathing Space Moratorium and Mental Health Crisis Moratorium) (England and Wales) Regulations 2020 (referred to in this article as the ‘debt respite regulations’) came into force. More details about the two types of moratoriums available to individuals and how they work can be found here.

As mentioned in the firm’s article on arrears, eviction and enforcement, arrears of rent and other sums due to landlords under a lease or tenancy agreement are caught by the debt respite regulations.

Whilst the breathing space regulations appear to relate solely to residential tenants, they will apply to commercial tenants that are non-VAT registered sole traders and individuals who have personally agreed a tenant company’s liability under a commercial tenancy. Below is a brief overview of how the breathing space regulations will affect landlords.

How will a landlord know if a tenant has been granted a moratorium?

If a moratorium is granted, it will commence the day after it is registered with the Insolvency Service. If arrears due to a landlord are caught under the moratorium, they should receive either an electronic or a postal notification from the Insolvency Service informing them of the moratorium, the type of moratorium in place and details of the qualifying debt owed to them. A landlord should also receive a further notification from the Insolvency Service when the moratorium ends.

What should a landlord do if they receive notification that their tenant has been granted a moratorium?

If a landlord has received notification, there are wide-ranging implications if they wish to take enforcement action against their debtor-tenant, and a landlord will also be required to take certain positive steps.

A landlord will be required to:

  • review their records as soon as reasonably practicable to see if the debt owed matches up with that mentioned on the notification received. If there is any difference or if the debt has been assigned, this should be communicated to the debt advice provider as soon as is reasonably practicable. If there are further debts that accrued prior to the commencement of the moratorium, these may be added to the moratorium but will in no way change the original commencement or end date of the moratorium. If the debt has been assigned, the landlord should also inform the assignee of the existence of the moratorium;
  • update the agent as soon as possible if one is appointed on the landlord’s behalf to manage the property; and
  • notify the court or tribunal of the moratorium if there are existing proceedings in relation to a moratorium debt.

It may be that a landlord has already commenced proceedings in relation to the debt: for instance, a money claim, possession proceedings based on grounds 8, 10 and/or 11 of Schedule II of the Housing Act 1988, forfeiture for non-payment of rent, or refusal to grant a renewal lease based on ground (b) of section 30(1) of the Landlord and Tenant Act 1954. If that is the case, the proceedings can continue but any order cannot be enforced without the court’s permission. The only time proceedings will be halted is where they relate to a bankruptcy petition.

During the moratorium, a landlord will be unable to:

  • require the tenant to pay interest that accrues on the moratorium debt;
  • require the tenant to pay fees, penalties or other charges in respect of the moratorium debt that accrue during the moratorium;
  • take enforcement action without the permission of the court. Taking enforcement action includes most actions a landlord will usually pursue in relation to a tenant who is in arrears of rent. For instance, a landlord will be unable to send a debt recovery letter or letter before claim, serve a statutory demand, commence any proceedings even where a relevant notice was issued prior to the moratorium commencing or deduct monies from the tenant’s deposit; and
  • contact the debtor-tenant requesting payment of the moratorium debt, although a landlord can continue to demand further sums that accrue during the moratorium period as these will not be classed as moratorium debt. If further sums are demanded, a landlord should ensure that no reference is made to the arrears that are captured by the moratorium.

The moratorium will not prevent a landlord from pursuing a guarantor in relation to the moratorium debt if one exists.

It is possible to apply to the court for permission to commence enforcement action in relation to the moratorium debt. However, the court must be satisfied that it is reasonable to allow the creditor to take the step in question and that it would not be detrimental to the debtor-tenant or significantly undermine the protections of the moratorium. An example may be where the deadline for a landlord to enforce is imminent and proceedings are allowed to be issued as long as the claim is immediately stayed until the expiry of the moratorium.

Once the moratorium is lifted, a landlord will be unable to recover any interest, fees, penalties or charges that accrued during the moratorium in relation to the moratorium debt. If proceedings did continue, this would include any legal costs in relation to the proceedings. It would be advisable that a stay is sought on the basis of the moratorium until it expires to limit these unrecoverable costs (subject to costs being recoverable under the terms of the lease or tenancy).

If a landlord fails to honour the moratorium, any notices served during the moratorium period will be invalid and proceedings issued may be struck out with cost consequences. The landlord may also be required to indemnify the debtor-tenant against any costs incurred as a result. It is therefore important that processes are introduced to stop automatic chasing of moratorium debts and, if in doubt, professional advice is sought before further steps are taken.


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