Help with Interest Clause in Leasehold Agreement - Non-Payment Insurance/Maintenance

[Anna_A]

Hi,

I have a question relating to a clause in a leasehold document regarding interest that I am hoping someone can help me with.

I am a freeholder of a residential building. I live in the top flat with some leaseholders living in the flat below me. I am having quite significant problems with them, one of which is that they are not paying insurance/maintenance. I have advised the leaseholders in previous letters that interest will be added in accordance with the deeds, hoping it would serve as a deterrent, but this has not worked. A few days ago, I wrote to them, advising I will be pursuing it via the small claims court if I do not receive payment in 10 days, and I am slightly concerned (maybe unnecessarily) that I haven't implemented interest correctly.

I have had it confirmed by a solicitor they are breaching numerous covenants, but it would prove too costly to pursue as I have decided to sell and my flat is now on the market. I would lose all, or a good proportion, of the monies owed to me by the leaseholders if I consulted a solicitor. It would feel like I am still paying for the leaseholders if I do that. So I have tried to work out what this clause means from various sites, including on here which has been really helpful. I have pasted the clause, as it is written, below.

"To pay the rents reserved at the time and in the manner aforesaid and to pay interest:

1. at the rate of 2% per annum above Lloyds Bank base lending rate for the time being, and
2. with a minimum of 10% per annum as well before as after any judgement on any rent which shall remain unpaid within 14 days of the same becoming due."

(To clarify, it states in a previous paragraph that the leaseholder should be paying "by way of rent the yearly sum expended in insuring the demised premises")

My calculation:

1. I think the Lloyds Bank base lending rate was/is 3.83%, so plus 2% would be 5.83%. Therefore, 5.83% of amount owed was added at the start when it became overdue.
2. 10% per annum, so I have added 0.00833% of the outstanding amount each month

My question(s):

a) Can anyone confirm if I have understood this correctly?
b) For the Lloyds Bank rate (1), I am not 100% sure if I am looking at the correct rate. The 3.83% I have seen is the Lloyds Bank 'annual interest rate (fixed)', but I am not sure if this is the same as the LB 'base lending rate' or where I can find any changes to this over the last 3 years.
c) If the 5.83% is correct, can I add this every year?

Any help on this matter would be greatly appreciated.

Thanks so much in advance, Anna

[Section20z]

Forget the interest, it's pennies. You can normally add late payment collection charges. In the first place I would write to each flats mortgagee threatening forfeiture and asking for payment and then take out money claim online.
or just employ a solicitor - they should just recover their cost from the tardy payers.
You need to make sure that all sums have been charged in accordance with the leases.

[sgclacy]

If you obtain judgement on money online claim you can then add statutory interest which is 8% pa

The lease provides for 2% above Lloyds base rate which is 0.1% so 2.1% or 10% whichever is the greater so you can use 10%

I would send a copy of the DRAFT proceedings to them and invite them to pay what you are currently owed spread over 4 months possibly with weekly payments. The draft proceedings will show the court fees and interest and will be a reminder that they need to address payment

[andydd]

Forget the interest, it's pennies. You can normally add late payment collection charges.

Not sure thats true, many, maybe the majority dont allow for extra charges to be added, there has to be specific wording within the lease for them to be recovered and its normally via the administration charge process, rarely do older leases contain such wording, newer ones which foresee modern difficulties of non-payment may do,.

[andydd]

If you obtain judgement on money online claim you can then add statutory interest which is 8% pa

The lease provides for 2% above Lloyds base rate which is 0.1% so 2.1% or 10% whichever is the greater so you can use 10%

I would send a copy of the DRAFT proceedings to them and invite them to pay what you are currently owed spread over 4 months possibly with weekly payments. The draft proceedings will show the court fees and interest and will be a reminder that they need to address payment

Make a court claim for money: Claim the interest - GOV.UK (www.gov.uk)

[Macromia]

Before you consider interest, or whether to go to the small claims court, have you confirmed that the demands that you have made for payment have been in full accordance with the requirements of both the lease and applicable legislation?
For example, have you enclosed a copy of the correct 'Summary of Rights and Obligations"?

If payment hasn't been demanded properly then nothing has become payable, and you won't be able to charge any interest (and won't get a judgement in court if the leaseholder knows how to defend against your claim).

[Anna_A]

Hi,

Thanks to each of you for your responses.

All of the invoices for services charges (insurance and maintenance) were accompanied by the correct documentation. I made a point of it. The leaseholders don't seem to even understand the difference between freehold and leasehold, let alone anything else, but should they seek legal advice then I know that this side of things is all correct from my side.

Will be submitting a claim today.

Thanks, Anna

[eagle2]

You should be seeking to avoid legal action, it will only make your relationship worse, You also have a duty to suggest alternative ways of settling genuine disputes,