Whilst Covid-19 continues to dominate the news headlines, there are many other widespread and preventable issues that continue to be of huge significance and affect large numbers of people, including the the hundreds of thousands of leaseholders in apartment blocks across the country who, almost four years after the Grenfell Tower fire, continue to face uncertainty and financial difficulties due to the implications of the Government fire safety regulations and the cladding scandal.
Following Government guidance in December 2018, the management companies of high-rise buildings have had to commission investigatory work around possible dangerous cladding and fire safety issues. The outcome of these investigations has led to the requirement to remove dangerous cladding, rectify fire safety issues and in some cases implement interim fire safety measures such as ‘waking watch’ and replacement of inadequate fire alarm systems – all of which cost a lot of money. In most buildings, all these costs are being passed on to the leaseholders as part of their service charge bills. Sometimes this can mean individual leaseholders are faced with a bill of thousands – I have heard of bills ranging from £30,000 to £120,000 per leaseholder. This can obviously cause extreme financial hardship which needs to be addressed and debt advice is sometimes needed if the leaseholder subsequently has unmanageable or problem debt.
Coupled with the ongoing financial issues which a lot of people are facing as a result of the coronavirus pandemic, individual leaseholders are often put in an impossible situation when faced by demands for payment of large sums of money by their management company. They know that if they do not meet the demand and pay the money their flat is ultimately at risk and so they are forced to look for credit from other sources. If money is borrowed from banks in the form of loans or credit cards then this can often mean the leaseholder is unable to service their debts.
Recent developments which will give some much-needed help to those who are facing financial difficulties, is the introduction of the Government’s Debt Respite Scheme (Breathing Space Moratorium and Mental Health Crisis Moratorium) (England and Wales) Regulations 2020, which is due to come into force on 4 May 2021 and will give individuals in debt the right to legal protection from their creditors. The rationale behind is to give breathing space for clients to give them time to speak to a professional, get advice and find an appropriate debt solution for them.
This short-term moratorium, which comes in two forms, the Breathing Space Moratorium and the Mental Health Crisis Moratorium, and gives debtors protection from any enforcement action from creditors.
A standard breathing space is available to anyone with problem debt, and allows them legal protection from any creditor action for up to 60 days. A mental health crisis breathing space moratorium, lasts as long as the treatment continues, plus 30 days. In order to be able to apply for a mental health crisis moratorium an individual must be receiving mental health crisis treatment and can provide evidence of such care from an approved mental health professional.
During this time, creditors will not be able to take any enforcement action relating to debts owed whilst either of these moratoriums are active. This includes an inability to charge any interest, penalties, or fees relating to such sums.
How can an individual obtain this breathing space?
A breathing space moratorium can only be started by a debt advice provider who is authorised by the Financial Conduct Authority (FCA) to offer debt counselling; or a local authority (where they provide debt advice to residents)
The debtor must be:
An individual living in England or Wales (includes sole traders)
Owe a qualifying debt to a creditor
Not have a debt relief order or an individual voluntary arrangement, or be an undischarged bankrupt
Not already had a breathing space in the previous 12 months
Speak to a professional
If you are struggling to cope with existing debts or arrears, you should check your availability under these new regulations. Such protection could be of huge value to debtors who have fallen into debt largely as a result of cash flow issues stemming from your leaseholder situation and/or from the immediate impact of the COVID lockdown.
It is important to remember however that these are temporary measures, and ones which can help a number of people who would benefit from additional time to address their financial obligations. However, it is not a solution to debt problems, its merely breathing space to be able to take stock of your situation and take time to access the support that you need.
If, for example, you have had increased demands for payment due to cladding issues and you are struggling to juggle your creditors each month and make payments on time, there are options available. Creditors can be contacted and new monthly payments can be arranged this can be done informally by contacting creditors individually or through a Debt Management Plan (DMP) or more formally through an Individual Voluntary Arrangement (IVA). If you contact me I will be able to advise as to the best way forward for you. I can also explain the implications if you need to stop making payments or reduce payments to creditors on a monthly basis.
There are always options available to individuals who are experiencing financial difficulties and I am happy to spend time talking through those options with any leaseholders affected by the problems we are all facing. I want you to know that free and impartial debt advice is available to you. All you have to do is give me a call on 0845 287 0939 or email email@example.com.
I understand the hardest part of dealing with problem debt is making the first phone call or contact. Please don’t hesitate to contact me at any time to discuss things; I know I will be able to help you.
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