Tenant trying to get out of paying late rent fee

[jpkeates]

jpkeates: Are you suggesting that there is a statutory time limit for lateness that I would be able to penalise for? I can't find anything at all suggesting there is a difference between a day or a month for lateness - only eviction rights.

Not a time limit, but any charge cannot simply be a penalty. 4% of a month's rent for a day's delay in payment looks like a penalty to me, there's no other way I can see that it's justifiable - but again, that's simply my opinion.

In the event of the tenant failing to pay the rent on the date stated, the tenant shall be due to pay a late fee of 4% on the overall monthly rent, which is at the rate of 4% for the calendar month.

This term has a number of issues beyond being probably unfair.
It largely nonsense as it stands and is possibly unenforcable simply because of that.

Ignoring the typo of "on" for "of", I suspect that the intent is that the tenant is liable to pay a fee when the tenant fails to pay the rent, which means its something that they would owe, rather than being "due", which is a prediction of their behaviour.

The clause "which is at the rate of 4% for the calendar month" is more problematic, as the rent (which seems to be the subject of the clause) can't be 4% of itself. If the intention is that the penalty is based on a rate of 4% for the calender month (which seems the only possible other interpretation - otherwise the inclusion of the text makes no sense) then charging 4% for one day would be wrong as that would be a month's late charge.

The only other interpretation that makes sense is that the rent is reduced to 4% of its normal value if the tenant doesn't pay when they're supposed to, plus a fee of a further 4%. Which seems very unlikely.

[landlord_of_the_dance]

Hello again everyone,

First of all, thanks again for all the thoughtful advice and analysis of the situation. This is certainly a lesson for me about the wording of tenancy agreements!

The situation has unfortunately become slightly more complicated though. I conceded to the tenant that their may be a difference in interpretation of the clause, and also it would be difficult for me to provide proof that the late payment cost me and my admin team £46. I now see and accept that it is only fair now that I waive this fee entirely. I want to consider the matter closed with my tenant.

However, he seems to have been upset by the whole situation and states that he intends to complain to the Property Ombudsman. As I have successfully charged the late fee to many times to other tenants in the past, I am worried that an investigation will be launched and I may be made to pay back all this money, or worse.

Am I being melodramatic about this? Surely if my old tenants did not contest the clause, then they agreed with my interpretation of it and the charge is fair. If it is found to be unfair, will their really be consequences for me beyond having to reword the clause in future agreements?

Regards,

Marcus

[jpkeates]

If other tenants agreed to the clause, it doesn't make it fair.

If the ombudsman does make a ruling it could be retrospective, but my guess is that it won't go that far - first of all the ombudsman would have to elect to become involved.

[landlord_of_the_dance]

Why do you think they would not elect to involve themselves? I haven't counted but it's likely to be over £1000 in fees claimed 'unfairly' by myself. I am still quite concerned.

Anyway, I shall not be renewing the contract with this particular tenant. I feel he is the one who is now acting unfairly.

[jpkeates]

The Property Ombudsman's main role is to handle complaints about estate and letting agents from consumers (both tenants and landlords).
I'm not saying it wouldn't accept a case against a landlord, but landlords aren't obliged to follow a code of practice, which makes any sanction more difficult.

The tenant would have to formally complain to you and you would have to provide no response or an unsatisfactory one before their complaints process would normally start.

I'm not saying it's impossible, I just think it's a threat that will probably go nowhere.

And given that you tried to claim a fee and, then, decided not to, doesn't really give the tenant much of a complaint.

[MdeB]

Anyway, I shall not be renewing the contract with this particular tenant. I feel he is the one who is now acting unfairly.

If he is otherwise being reasonable and paying the rent, then don't be hasty.
Don't let personal feelings impact business decisions.

[landlord_of_the_dance]

Then that only adds to my concern, as I run my business as a landlord as a small registered lettings agency. That's why I claim the late fees as administration as well as disruption.

But from what I gather from what you are saying, if I have made a legally 'unfair' claim, and back down on it, there will be no case against me and I can carry on making these charges until someone refuses, when I can just back down again?

That would be a best case scenario for me. Let's hope this is so!

Thank you once again jpkeates!!

[landlord_of_the_dance]

If he is otherwise being reasonable and paying the rent, then don't be hasty.
Don't let personal feelings impact business decisions.

I would ordinarily agree, but I am 100% sure that I will be able to fill the tenancy without missing a single days rent, and also earn on administration fees. So from a business standpoint it seems like the best course of action, and also having a more compliant tenant is also likely to favour me in this regard.

Thanks for your consideration MdeB :-)

[MdeB]

I conceded to the tenant that their may be a difference in interpretation of the clause, and also it would be difficult for me to provide proof that the late payment cost me and my admin team £46.

Not the way to do it.
Never explain why you have changed your mind, as that may give tenant more ammunition. Just state that having considered their objection you will, in this instance, not be enforcing that clause, but you reserve the right to enforce that clause in the future.

[landlord_of_the_dance]

Not the way to do it.
Never explain why you have changed your mind, as that may give tenant more ammunition. Just state that having considered their objection you will, in this instance, not be enforcing that clause, but you reserve the right to enforce that clause in the future.

I actually never did explain why to them, and what you have said is more or less what I did say. I think his pursuing of a higher complaint against me is that he believes I will attempt to impose the late fee on others in the future. If it does go higher then I'm sure the reasons for my concession as I have explained here will become known, hence my worry.

Marcus

[jpkeates]

Then that only adds to my concern, as I run my business as a landlord as a small registered lettings agency. That's why I claim the late fees as administration as well as disruption.

But from what I gather from what you are saying, if I have made a legally 'unfair' claim, and back down on it, there will be no case against me and I can carry on making these charges until someone refuses, when I can just back down again?

If you operate as a letting agent there are complicating issues.

First of all, you will be registered with one of the ombudsman approved redress schemes.
That scheme will direct the path of any complaint.
As all of the schemes have a code of practice (as far as I know) either the fee will be allowed by the code of practice or it won't be.

If you trade as a letting agent and the ombudsman decides to make a point, they could remove you from their approved scheme and, effectively ban you from letting - although that's a beyond belief worst case scenario.

Regarding your point about continuing in the practice.
Essentially you are right.
If someone does something wrong and it is not reported to anyone or no one acts, they are essentially able to continue in that behaviour.
It doesn't make it right or mean that it won't be reported in future.
If you continue to back down when challenged, it would be hard to take action against your threat of a charge.
Living with your conscience isn't a legal issue.

Any value above the direct cost of the late payment belongs to the landlord, as you can't profit from the landlord's asset without their specific agreement (which, again, isn't anything that anyone would ever know or act on).

[landlord_of_the_dance]

Wow great comment jpkeates! Very reassuring and even-handed I feel.

If this were really something so unconscionable I'm sure it would not be as incredibly simple as that to practice legally. I think this is merely good business practice. Tenants should know the law and their rights as well as I should, and now I do. It is not my fault if they do not know they can simply just say 'no'.

Thanks chaps!

[mariner]

OP, stop trying to wriggle off the hook. In Oct we expect a whole raft of new legislation, including inability to charge the T any Fees. You have been told the OFT decided late payment fees may be 'unfair' many months ago, so I would delete your 4% pa from future ASTs & not apply it for current Ts. Monitor your Rental Account and sue/evict anyone owing more than 2 month rent, when you can legally request up to 8% pa be applied.
If you estimateyou have collected £1000+ in late payment fees that is a lot to poss refund. It is also Income whhich needs declaring to HMRC.

[jpkeates]

Tenants should know the law and their rights as well as I should, and now I do. It is not my fault if they do not know they can simply just say 'no'.

Tenants are consumers and are not expected to know the law.

As it happens, fees for deaults aren't going to be banned,
However, penalty fees such as this are already not legal.
Not being caught doesn't make something legal.

[theartfullodger]

Do you as landlord or you as letting agent declare the penalty fees as income?

Which letting agent redress scheme are you as agent a member of?

Cheers!