Calculating interest on late payments of rent?

hayleythedaisy

Hi, I hope someone can help me. I am currently renting a place out as I can't sell it, but the tenant is late paying the rent. I have looked at the tenancy agreement and it says for late payment of rent interest will be charged at 4% above the England base rate (currently 0.5% I think) from 14 days after the rent was due.

My question is how do you work that out? The rent is £525 a month, 4.5% of that is £23.63. Do I add this amount on for every day it's late, every week it's late or every month it's late? (Or am I completely wrong?)

Thanks in advance, hopefully they will pay before the 14 days is past but I just want to know where I stand.

Thanks Hayley

pinkshoes

hayleythedaisy wrote: »

My question is how do you work that out? The rent is £525 a month, 4.5% of that is £23.63. Do I add this amount on for every day it's late, every week it's late or every month it's late? (Or am I completely wrong?)

Do you get £23.63 per day interest by having £525 in an ISA???

This would be the interest per year, so you need to divide it by 365, then multiply by the number of days late.

mbga9pgf

pinkshoes wrote: »

Do you get £23.63 per day interest by having £525 in an ISA???

This would be the interest per year, so you need to divide it by 365, then multiply by the number of days late.

If you have microsoft Excel, look up how to do a FV equation in excel. Depending on the figures you put in, it will do daily monthly or yearly compound interest. Personally, to keep things simple, I would do it monthly.

Oh, if they have voided for 1 month, I would be more concerned about them voiding on subsequent months TBH rather than the pittance you are entitled to in interest. I think they can void for 3 months before legally you can do anything about it. Wonders of renting rather than selling... Why not just drop the price and sell?

tbs624

Hayley - have you actually contacted your T yet to ask why their rent payment is late?

If you haven't done, then just drop them a line reminding them of the date on which their rent payment is due under the terms of the contract and ask them to bring their payments up to date within the next 5 days and/or contact you to discuss the matter..

Once a T has missed 2 months' rent payments (if paying monthly) then you can apply to the court for repossession. Bear in mind however that should the T pay off some of the arrears prior to a court hearing you may be unsuccessful.

You should have familiarised yourself with the implication of the terms of your own contracts long before you and your T signed up to them: you may like to consider joining a LL association so that you can learn how to do this and to deal with late rent payments. (Membership fee tax deductable.)

Fire_Fox

pinkshoes wrote: »

Do you get £23.63 per day interest by having £525 in an ISA???

This would be the interest per year, so you need to divide it by 365, then multiply by the number of days late.

That's a bit harsh, the OP is aware she doesn't understand APRs and started a thread to make sure she was getting it right.

silvercar

Worrying about the pennies here is not the right way to go. Less than 7p a day is not going to pay your bills. Find out when the tenant is going to pay the rent, why its late and whether it will happen again.

hayleythedaisy

Hi, Thanks for the replies. I have tried to contact the tenant but haven't been able to get hold of her yet, it's only a couple of days out but I wanted to be able to say if it's not paid by X date then £X will be added, in the case of 7pence a day I don't think I'll bother!!!

And a couple of things that were raised - the tenancy agreement is one of those standardised ones - I guess I was a little niave but have learnt my lesson. I would rather get my rent paid on time than have the interest, but had it been £23 a day it would've been a bit of a kick up the bum (although to be honest I'm a bit of a pushover and probably wouldn't have enforced it)I would love to drop the price and sell but unfortunately this would leave me with about £30k negative equity if it even sold. I'm better off keeping it and making a loss for a few years than loosing that much. And I will look into the Landlords association. (I think I could do with the help! as I said I have been a bit niave and would probably have been better off going through an agent.)

Thank you for your promt help and advice, :-)

Fire_Fox

hayleythedaisy wrote: »

Hi, Thanks for the replies. I have tried to contact the tenant but haven't been able to get hold of her yet, it's only a couple of days out but I wanted to be able to say if it's not paid by X date then £X will be added, in the case of 7pence a day I don't think I'll bother!!!

This is worded as if you are handling this by telephone: don't. Recorded delivery letter to the property so your tenant cannot say you have been intimidating or unprofessional.

clutton_2

join national landlords association immediately - you can offset the cost against any tax you are due to pay, and you get cheaper insurance as a member, and you get a free legal helpline and lots of documents free - invaluable to newbie innocent young landlords/landladies

pinkshoes

Fire_Fox wrote: »

That's a bit harsh, the OP is aware she doesn't understand APRs and started a thread to make sure she was getting it right.

It was only a little harsh, but I was born sarcastic, and sometimes putting it in a more obvious way helps people understand.

No offence was meant by it.

theartfullodger

hayleythedaisy - you've a lot to learn... Applying interest to late rental payments isn't the way to build good relationships with tenants....

Go see them/write to them. Be patient, be civilised, be understanding, be BRITISH.

What will chucking them out & finding a new tenant, after the void, cost you??

Welcome to the fun world of property

Cheers!

Lodger