Tenant trying to get out of paying late rent fee

[landlord_of_the_dance]

Hello!

This month my tenant paid their rent late by about 12 hours. As is stipulated on their contract, they are obligated to pay a fee of 4% of their monthly rent for any late payment of rent.

However, he has tried to get clever and claim that this is an 'Unfair Contract Term' and that the clause in the TA is 'superceded by his statutory rights' in the Housing Act 1988. He has also said that he is willing to let this go to court. Over £46!!

I cannot find any evidence to support this in the Housing Act or the OFT but other online forums seem to suggest that a court would not rule in my favour if it got there.

Is this a load of crock from my tenant and can I push on with enforcing this charge?

Many Thanks In Advance,

Marcus

[DPT57]

What a ridiculous nonsense to charge a late payment fee for 12 hours! Surely good relations with the tenant are worth more than this.

[Lawcruncher]

Your tenant is right but for the wrong reason. The other forums are also right to suggest that you will get nowhere with this one. It is a basic principle that damages or compensation for breach of contract may not exceed the loss incurred. Any provision which requires excessive compensation is a penalty. When it comes to late rent fixed figures are out. If the amount specified in the clause is deemed a penalty you cannot replace it with a lower figure and so lose any right to compensation completely. Stick to a reasonable rate of interest. The government's tenancy agreement provides for 3% above the Bank of England's base rate. I would go with that in future.

[jpkeates]

You have no way of knowing for sure if a charge is unfair or not without going to court.
Unless you can show why the cost is justified, I'd say it's a penalty charge, which isn't lawful - but that's just my opinion.

You can charge reasonable interest on late payments, but 4% for less than a day is beyond pushing it, you're basically taking the proverbial.
You might get away with 4% per month.

[landlord_of_the_dance]

Sorry DPT57 - I understand you feel this way but the TA was written, agreed to and signed for a reason. I have my own cashflow commitments and any late payment disrupts this.

I would like opinions from a legal perspective if that's OK. Thanks for your response though.

Marcus

[theartfullodger]

You'll get that answer from a legal perspective from the judge when tenant declines to pay & you sue.

Judge will agree with tenant.

And people wonder why landlords get a reputation for greed.

No offence but cashflow problems are to be expected. Any wise landlord should budget, IMHO, for at least 7 months non-payment of rent to cope with tenant-from-hell (or agent-from...) or a major unexpected repair bill. And have cash reserves to cope.

If £46 is a financial or emotional problem for you this may not be the business for you.

[landlord_of_the_dance]

Thanks very much for your info Lawcruncher & jpkeates. Very much appreciated.

Here is the exact clause from the TA:

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 is unfortunate news if so. It doesn't seem fair to me that I cannot claim the pre-agreed compensation.

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.

Thanks,

Marcus

[alex1]

There is guidance on this from the government: https://www.gov.uk/government/public...ct-terms-cma37

Look at page 87 of the first PDF linked to from that page: https://assets.publishing.service.go...n_Guidance.pdf (my PDF viewer thinks this is page 89 because the first couple of pages aren’t numbered in the document itself).

As the legislation it quotes states: “A term which has the object or effect of requiring a consumer who fails to fulfil his obligations under the contract to pay a disproportionately high sum in compensation” may be unfair.

£46 for paying rent 12 hours late is clearly disproportionate.

The real problem you have here is the flat 4%. It may be reasonable in some cases but it certainly isn’t in others (including this one). On the next page of the PDF, it says: “A disproportionate financial sanction involving requirement to pay a fixed or minimum sum, in all circumstances, will be open to challenge if the sum could be too high in some cases.”

I haven’t checked my tenancy agreement but I think I have to be several weeks late with rent before there’s any penalty (which is in the form of daily interest, rather than a fixed percentage).

[landlord_of_the_dance]

Wow Alex1, thanks for doing that digging! Very much appreciated.

It still sounds somewhat vague... £46 is not a lot of money really, I do not feel it is very high or disproportionate at all compared to the rent and the disruption that huge chunk of missing money causes me even after only 12 hours. It really does seem only fair to me.

Surely my tenant is bluffing? He stands to lose a lot more in legal proceedings (time consumed as well) if he really does want to take it that far.

Thanks again for all the tremendous help.

Marcus

[Stef Cooke]

As you say, £46 is not a lot of money, so do you want to lose a tenant over it? Do you want to go to court over it?

And, as others have said, he really doesn't stand to lose anything, et alone more, as it is likely your charge is too quickly applied and disporportionate.

[landlord_of_the_dance]

Hi Stef,

I doubt that I would lose the tenant. The house is quite a steal for what it is and the location it is in. They are unlikely to get anything else like it anywhere near this price range - I'd be willing to bet that he knows he would be very easily replaced.

Thanks,

Marcus

[MdeB]

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.

I would interpret "at the rate of 4% for the calendar month." as being the amount for the whole month, So for 1 day that would be about £1.50.

£46 is not a lot of money really,

You might feel that way; many don't.

How about you send me £40 so that I can have a bit of animal protein in my diet this month?
£40 is not a lot of money, after all!

[DPT57]

There are many ways in which a disaffected tenant can make life difficult for a landlord. My comment was based on my belief that levying such a punitive fee for such a minor infringement is not a sound business decision.

[HantsAgent]

There are many ways in which a disaffected tenant can make life difficult for a landlord. My comment was based on my belief that levying such a punitive fee for such a minor infringement is not a sound business decision.

I agree wholeheartedly.

If the tenant paying his rent late by 12 hours causes you trouble you really shouldn’t be a landlord.

[Logical.Lean]

What is the REAL PROVABLE cost to you and how have you sought to mitigate this cost
I get paid 2% interest on the account that my rent goes into. There is a buffer, because that's how I like it. So the cost to me is lost interest, which is erm 2%/365.
Obviously there's a cost to chase the tenant, but in this case we are talking about a text and a phone call. So erm No cost at all.

I'd suggest to them that if they pay next months rent a day early and prove they have set up a standing order so it is automatic in future, you'll let it go this time. If it happens again, why not suggest moving the rent day -..... I have done this when a tenant changed jobs and was getting paid 4 days later which caused her a real cash-flow problem. We added 4 days rent to the first payment on the new date to cover it and everyone was happy.