Charging Interest on Rent Arrears

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    Charging Interest on Rent Arrears

    Hi all

    I have a tenant who consistently isn't paying all her rent on time, for various reasons which don't sound valid.

    I've been lenient about when she pays, as long as eventually she does pay, and she's not massively in arrears, but is holding back say £100-200 a month for up to 30 days.

    In the Tenancy Agreement, there's a clause that arrears over 14 days can be charged interest at 3% per day.

    I've not implemented this clause up to now, or even pointed it out, but should I?

    I don't particularly want the interest, but I think it might encourage prompter payment.

    Does anyone have any views on charging interest payments on arrears, or any experience in enforcing such a clause? Is it a common thing to do?

    Many thanks for any advice you can give!

    #2
    When was tenancy signed? (Tenancy fees legislation).

    Send a message next time, serving s8g10 & 11. She might realise the risks & take the hint.
    I am legally unqualified: If you need to rely on advice check it with a suitable authority - eg a solicitor specialising in landlord/tenant law...

    Comment


      #3
      It's not a common thing to do, but you're allowed to do it.
      3% on £200 for a month is 50p, so I'm not convinced it will make any difference.
      When I post, I am expressing an opinion - feel free to disagree, I have been wrong before.
      Please don't act on my suggestions without checking with a grown-up (ideally some kind of expert).

      Comment


        #4
        I'd be inclined to increase the rent when the opportunity arises so that you receive the full rent each month & the late payment is a bonus!

        Comment


          #5
          Originally posted by WebLand View Post
          In the Tenancy Agreement, there's a clause that arrears over 14 days can be charged interest at 3% per day.
          I suspect that's a misunderstanding, and it's actually an annual rate of 3%, calculated per day.
          If you actually mean 3% per day, then no, that's not allowed.

          Comment


            #6
            Thanks everyone for your replies. Theartfullodger - the Tenancy Agreement was signed in August 2019. jpkeates and Ted.E.Bear, I think you're right, i.e. that I may have misunderstood this. The exact text in the Tenancy Agreement is:

            A default fee will be charged for late payment of rent but only where the rent payment has been
            outstanding for 14 days or more (from the date set out in the tenancy agreement) this will be calculated
            at 3% above the Bank of England’s base rate for each day that the payment has been outstanding. This
            cost to be paid within seven days of written demand, which if not paid the tenant hereby agrees the
            outstanding sum can be deducted from the Deposit at the end of the Tenancy.

            Comment


              #7
              Base rate is an annual rate so the rate in the contract must be annual.

              Comment


                #8
                Originally posted by WebLand View Post
                A default fee will be charged for late payment of rent but only where the rent payment has been
                outstanding for 14 days or more (from the date set out in the tenancy agreement) this will be calculated
                at 3% above the Bank of England’s base rate for each day that the payment has been outstanding.
                That is the maximum we are allowed to charge these days. But you can probably also claim cost of paper, ink, envelope and postage for writing to the T about the arrears.

                Comment


                  #9
                  At 3% over the BoE base rate (0.75%) the interest on £200 for a month is 62.5p
                  When I post, I am expressing an opinion - feel free to disagree, I have been wrong before.
                  Please don't act on my suggestions without checking with a grown-up (ideally some kind of expert).

                  Comment


                    #10
                    A princely sum! Hardly worth the effort.

                    If I've understood correctly, and for any other people in the future with the same query as me, the calculation is:

                    days late
                    --------- x 3.75 x Arrears sum / 100
                    365

                    I'd just like to thank you all for sharing your expertise. This is SUCH a helpful and valuable forum, saves so much confusion and potential mistakes.

                    Comment


                      #11
                      I put 21% and add it to the arrears. It only matters if the tenant defends it and it goes to court. If it's not defended you'll get it. If it goes to court the judge might disallow it but add interest at a lower level.

                      It's the same with Litigant in Person fees.

                      Comment


                        #12
                        The right amount is probably 8%.
                        When I post, I am expressing an opinion - feel free to disagree, I have been wrong before.
                        Please don't act on my suggestions without checking with a grown-up (ideally some kind of expert).

                        Comment


                          #13
                          Originally posted by Berlingogirl View Post
                          I put 21% and add it to the arrears. It only matters if the tenant defends it and it goes to court.
                          it might matter if it gets reported to trading standards as a breach of the tenant fees act.

                          Comment

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