How to calculate the interest on rent arrears - 4% / Bank of England annual base rate

[DanielM]

Good evening all, hope you're all well during these difficult times.

Does anyone have a simple mathematics equation to calculate the interest that a landlord can claim on rent arrears?

The tenancy agreement says "the Landlord reserves the right to charge interest on any amounts of rent due and in arrears at the rate of 4% above the Bank of England annual base rate calculated on a day to day basis from the date that the amount becomes due until the date that it is paid".

So 9 months rent arrears unpaid with tenancy ending on 24 July 2020 (rent was £995 pcm, so total rent unpaid £8955), and still unpaid at today's date, is how much in total, including interest, please?

I haven't the slightest idea how to begin to work this out.

Thanks very much to anyone who can do these calculations.

Dan

[jpkeates]

Each month's rent has its own calculation because each amount has been owed a different amount of time.

You take the number of days since the amount was due divided by 365 (366 if it was before March 2020) and apply that to the 4.5%.
The take the result and multiply the rent amount by that.

So if the rent was £995 and the debt is 270 days old, the sum is £995 * (4.5%*(270/365)) which is about £33.12.

[cuttingman]

You need a compound interest calculator: https://www.thecalculatorsite.com/fi...calculator.php

£995 at 9 months at 4% adds about £150 interest to the total.

[jase222]

4.5% above 0% base rate = zero before long

[ash72]

If the T isn't going to pay your rent, they will certainly not pay the £33.12. Also there was a ban on excessive late payment charges (1.6.2019) and restricted to a max of 3% above the BoE BR, when did the tenancy commence? So the max you should be asking is 3.1%.

Just another note, shouldn't the interest be charged on each of the months separately rather than the total amount? So the first late payment would have 9 months of interest, the second one having 8 months etc. That's why it's more simple not to bother and try to get any rent back and serve notice.

[Section20z]

We'll that's how compound interest works but it's certainly not £33.12, that's not even the interest on the first month's arrears, which is now 13 months overdue plus each subsequent month adds interest for a proportionately shorter time.
If you are bothering to takes claim action for the £8955 debt it won't cost any more to add the interest
We don't know if the tenant has substantial assets.

[jpkeates]

You need a compound interest calculator: https://www.thecalculatorsite.com/fi...calculator.php

£995 at 9 months at 4% adds about £150 interest to the total.

You can't apply interest to the interest because the tenancy agreement doesn't allow it, so compounding isn't necessary.

And, yes, each month's arrears would have its own calculation.

[theartfullodger]

Forget interest, simply issue s8's for arrears whenever there are any (even 1p underpaid). (Assuming you are landlord or agent)

Are you landlord, agent, tenant, solicitor or student doing research, please??

Cheers!

[MdeB]

I think Tenant Fees Act, Schedule 1 Para 4(5) restricts interest to 3% above base rate

[Section20z]

Forget interest, simply issue s8's for arrears whenever there are any (even 1p underpaid). (Assuming you are landlord or agent)

Are you landlord, agent, tenant, solicitor or student doing research, please??

Cheers!

Can you issue s8 for a tenancy that ended 4 months ago ?