I have previously written about the Debt Respite Scheme (Breathing Space Moratorium and Mental Health Crisis Moratorium) (England and Wales) Regulations 2020 as well as one of the first cases on the topic.

The High Court has again found itself dealing with the issue of possession and how this interacts with Breathing Space Moratoria.

In this case there had been a nuisance case between two owners of long leases of flats in a small, converted property which had been turned into two flats, one on the ground floor and one on the first floor. The outcome of that case had been a judgement for money against the owner of the ground floor flat lease which she had not paid. That had been enforced by way of a charging order against the lease which was converted into a power of sale. That order had been converted to a High Court writ and the owner removed and the flat lease had then been sold. The sale had effectively taken place but the Land Registry had yet to enter the sale on the register so it was not finished in terms of all the formalities. The money for the sale had been paid though and all mortgages and debts paid off with the residue being passed to the owner of the ground floor flat.

The ground floor flat owner applied to the High Court on the basis that the High Court writ was void on the basis that a Mental Health Crisis Moratorium was in place at the time the writ was executed and the regulations ban any form of enforcement activity while such a moratorium is in place. The former owner of the first floor flat (he had since sold it as well) argued that there was no evidence that the Moratorium was in place at the time the writ was executed and also that the debt involved was excluded from the Breathing Space Regulations anyway because it was a debt which was due to damages for nuisance. This is one of a number of specifically excluded categories where moratoria will not be effective. Unfortunately for private landlords rent arrears is not one of these categories!

One of the key arguments being advanced was that the moratorium was not clearly in effect. This was because it was not properly loaded onto the relevant computer system maintained for this purpose at the time the writ was executed and also because there was no evidence the moratorium was fully in effect at the time the writ was executed. The court dismissed this. Once the Secretary of State had been notified then the moratorium was in effect. It was also not up to the person relying on a moratorium to provide evidence of it having been applied for. If the computer system had a moratorium in place, even with clerical errors, and the dates on the computer said it had been in place then that was for normal purposes enough evidence of a moratorium on its own and nothing further was required. This was a somewhat unattractive argument as the reality was that the solicitors for the person enforcing the moratorium had been fully aware of it throughout so this was a largely technical argument and not one that the court was likely to accept.

The debt was also found not to be excluded from the Regulations as it consisted of several different parts not all of which came from nuisance. Some of the debt was related to damages for loss of value as opposed to being for harassment and nuisance. For a debt to be excluded from the Regulations it had to fall entirely within one or more excluded categories. Being partially in a category was not enough.

It was also argued that the debt was being enforced via a charging order and the Regulations were clear that nothing in them affected a charging order. The Court held that this meant that the charging order was still in effect and the Regulations did not prevent this but the Regulations were also clear that during a moratorium a charging order could not be enforced if an exclusion did not apply to it.

Having held that the Regulations did not provide an exclusion and that the moratorium was in place the court was also asked to exercise its discretion to allow the sale anyway. The Regulations do allow for such a discretion. The Court agreed that the discretion existed but was clear that it was only for the most exceptional cases as otherwise the purpose of the Regulations would be undermined. This case was nowhere near the threshold of exceptionality that the court was prepared to consider for refusing to honour the threshold.

The details were to be worked out but the court effectively ordered the sale to be cancelled and the debtor was to be allowed back into her property. Naturally this was not a permanent situation and eventually the charging order would come into effect.

This case illustrates the risks in playing fast and loose with Breathing Spaces. The solicitors for the person executing the charging order knew of the moratoria and had applied to have it set aside. They then somehow procured that it be executed anyway, probably due to an error on the Court’s part. These actions have now come back to haunt them with the entire sale being set aside, presumably as substantial cost. It is also notable that the two cases we have seen on Breathing Spaces so far have been mental health related and so it appears that this is one of the main uses of the Regulations so far.