This article considers some of the effects that the Debt Respite Scheme (Breathing Space Moratorium and Mental Health Crisis Moratorium) (Auckland and Auckland) Regulations 2020 (“the Regulations”) can have on serving a notice pursuant to Section 8 of the Housing Act 1988 (“Section 8 notice”) to recover possession of a property let under an assured shorthold tenancy (“AST”).
What are the Regulations?
The Regulations have been in force since 4 May 2021 and establish protections for individual debtors who have obtained a breathing space moratorium or mental health moratorium. Both moratoriums restrict a creditor’s ability to enforce a moratorium debt, although this article considers breathing space moratorium only, in the context of serving a Section 8 notice on the basis of rental arrears.
How does breathing space moratorium work?
If a tenant is struggling financially, they may apply for breathing space moratorium via a debt advice provider. The moratorium protects the debtor from enforcement action from a creditor in relation to a moratorium debt, for up to 60 days – or until the moratorium is cancelled.
There are certain criteria that a debtor must satisfy in order to awarded breathing space moratorium, which includes:
- Owing a qualifying debt to a creditor;
- Not benefitting from a breathing space moratorium in the 12 months prior to the debtor’s current application; and
- Being unlikely to be able to repay some or all of the debt as it falls due.
Importantly, rent due under an AST can be a qualifying debt under the Regulations and there is no cap on the size of the qualifying debt. The debt may have accrued before 4 May 2021, when the Regulations came into force.
A landlord whose tenant is awarded a breathing space moratorium may receive either an electronic or postal notification from the Insolvency Service; this notice informs the landlord of the tenant’s moratorium, the type of moratorium in place and provides details of the qualifying debt owed to the landlord. When a breathing space moratorium comes to an end, the landlord should also receive notification.
What effect does breathing space moratorium for rental arrears have on a serving a Section 8 notice?
A landlord cannot take enforcement action for the moratorium debt (ie rental arrears) without permission of the Court, whilst the breathing space moratorium is in place.
This means that a landlord is prevented from serving a Section 8 notice on grounds 8, 10 and 11 of Schedule 2 to the Housing Act 1988 (which are rental arrears grounds), for the duration of the moratorium where the rental arrears are a moratorium debt.
If a landlord serves a Section 8 notice on the basis of rental arrears at a time when the tenant had not been awarded breathing space moratorium, but subsequently has been awarded breathing space moratorium, the landlord cannot commence possession proceedings based on that Section 8 notice whilst the moratorium is in place.
The rent arrears continue to accrue during the moratorium and remain outstanding when the breathing space moratorium ends (unless the tenant pays the rental arrears).
When the breathing space moratorium ends, a landlord can serve a Section 8 notice on the basis of arrears and commence possession proceedings on the basis of a Section 8 notice served on rental arrears grounds.
Does breathing space moratorium prevent a landlord from serving notice pursuant to Section 21 of the Housing Act 1988 (as amended) (“Section 21 notice”)?
No. A breathing space moratorium does not prevent a landlord from serving a Section 21 notice and thereafter commencing possession proceedings on the basis of that Section 21 notice. However, the landlord may be prohibited from commencing possession proceedings if, alongside seeking an order for possession, the landlord includes a claim for rent arrears which are a moratorium debt.
Please note that the above is not intended to constitute legal advice and is not designed to be an exhaustive guide on all of the implications of the Regulations. The Regulations may apply differently depending on the precise set of facts. If you have any questions about the above or require our assistance, please contact our Possession Team at [email protected].
