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Case brief: Mental health crisis moratorium stops eviction
Posted on 27/06/22 in Housing Matters
In Lees v Kaye  EWHC 1151 (QB) the High Court held that the eviction of a debtor protected by a mental health crisis moratorium and the sale of their property was ‘null and void’. This case brief explores the applicable law and the details of the case.
The Debt Respite Scheme (Breathing Space Moratorium and Mental Health Crisis Moratorium) (England and Wales) Regulations 2020 (DRS Regs) came in on 4 May 2021. They provide protections for people in debt who are receiving specific types of mental health crisis treatment.
The respite can start following an application for a mental health crisis breathing space from a debtor or their representatives, carers, or social workers. Applications are made to an authorised debt advice provider, or through the single point of application.
Under reg 5 of the DRS Regs, the qualifying debts eligible for inclusion in the moratorium include arrears in respect of rent and mortgage, consumer credit agreements such as loans and credit cards, utility and fuel, benefit overpayments, and council tax. The moratorium applies to additional debts owed to the same creditor if they have already been notified of the moratorium in relation to another debt.
There is no limit on the number or sum of the debts included in the moratorium. However, for a debt to be included it must be a liquidated sum, and some debts cannot be included, for example student loans, business debts, and child maintenance.
To qualify for a moratorium, a person must demonstrate that they owe a qualifying debt to a creditor and that they are not subject to other insolvency measures such as a debt relief order, bankruptcy, or an individual voluntary arrangement.
Effect of the moratorium
The protections of a mental health crisis moratorium include pausing enforcement action and contact from creditors, and freezing interest and charges on their moratorium debts.
Any action taken by creditors, including landlords and mortgage lenders, to enforce a qualifying debt during a moratorium is null and void under reg 7(12) of the DRS Regs.
Lees (L) and Kaye (K) were joint freeholders of a property. Each of them also owned a lease on their respective flats. Following a dispute, K obtained a significant money judgment against L. Subsequently, K secured the judgment by way of a charging order against L’s flat, and then obtained an order for possession and sale of the property.
On 26 October 2021, a mental health crisis moratorium was made to protect L. The moratorium was extended on 12 January 2022 and again on 12 February 2022. K was aware of these orders but took the view that they did not prevent them from taking possession and selling L’s flat to recover their money.
On 13 January 2022, enforcement agents executed a writ of possession, evicted L, and took possession of the flat. On 10 March 2022, K sold the lease of the flat to a third party.
L applied to the High Court for an order setting aside the execution of the writ of possession and the subsequent sale. They also applied for a declaration that the eviction was ‘null and void’ under to reg 7(12) DRS Regs, and submitted an objection to the transfer of the registration.
K argued that the moratorium had no effect on a charging order in place before the start date of the moratorium, that the debt was 'non-eligible' under reg 5(4)(i) as it included an amount for personal injury, and that L no longer had any interest in the property due to the making of the charging order, so they could not object to the transfer of the registration.
The Court’s decision
The High Court granted L’s applications and ordered that L be restored to their position before eviction. It held that the moratorium was properly registered and a matter of public record, so it was effective against K. The debt was all eligible and protected by the moratorium notwithstanding the element covering damages for personal injury. The charging order was an eligible debt under reg 5(4)(a) of the DRS Regs.
The eviction and sale of L’s flat constituted enforcement of a debt and was null and void under reg 7(12) DRS Regs. K had raised no exceptional circumstances that would persuade the court not to grant relief. This would frustrate the aim and policy behind the debt respite scheme regulations.
The case of Lees v Kaye provides clarity on the issue of whether a charging order can be enforced due to the wording of reg 7(13)(a) DRS Regs. As an order for sale application is made under a Part 8 claim, it can no longer be argued that it is not enforcement of a moratorium debt. Reg 7(6)(c) DRS Regs is clear that a creditor is prevented from taking ‘any enforcement action in respect of a moratorium debt’, and this is further echoed under reg 10(5).
If the charging order is to secure a qualifying debt under reg 5 DRS Regs, an order for sale application is enforcement, and therefore prohibited. To enforce an order for sale the same rules must apply.
Interestingly, although L had been evicted (albeit illegally), the mental health crisis moratorium still gave them protection under Reg 7(7)(b) DRS Regs. The sale of the property was ‘a step to enforce’ the order for sale so the court declared it ‘null and void’.
Furthermore, this case now provides an argument that any sum relating to personal injury must be the whole sum for it to be a ‘non-eligible debt’ under reg 5(4)(i) DRS Regs.
While the circumstances of this case are unusual, it may be a helpful case to cite to landlords who appear to be unwilling to respect the restrictions imposed by a moratorium.
Breathing space and possession proceedings covers when a moratorium prevents landlords and mortgage lenders from taking possession for rent arrears.
Breathing space and landlord notices clarifies when landlords cannot give notices for rent arrears included in a moratorium while the moratorium is in force.
Mental health crisis moratoriums: one year on provides insights from a mental health and money adviser at Rethink Mental Illness, and their role in the Lees v Kaye case.
Breathing space: arrears and evictions explains how the Debt Respite Scheme can be used by anyone helping people in rent or mortgage arrears.
Breathing space: toolkit lists more resources including details of debt advice providers.
Specialist Debt Advice Service (SDAS)
Advisers dealing with a tricky debt case and needing help to find an answer, or a second opinion, can call the SDAS helpline on 03300 580 404 or submit an enquiry online using the webform.
This service can’t advise members of the public. They can use Money Helper to find a debt adviser.
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