Calculating Interest on Unpaid Rent

the_salmon

Hi all,

I feel thick for posting this (and no doubt some of you will tell me I am!!) but I have a tenant who is currently 10 days late with his rent. I have a clause in the agreement which states that they will 'Pay interest at the rate of 4% above the BoE base lending rate...which remains unpaid for more than 14 days, interest to be paid from the date the payment fell due until payment'

But how do I work this out?
0.5% interest rate plus 4% = 4.5% ( i can do that bit!)

the rent is £350. But 4.5% of that per day = £15.75 per day, which seems steep, especially as he would have now accrued £157.50.

Anyone care to shed any light as to the correct way to work it out?

Annisele

I think you've missed a step

BoE base rate is indeed 0.5% - but that's per year, not per day.

So (ignoring compounding) your calculation is nearly right - 4.5% of £350 is £15.75, but then you want to divide that by 365 to get 4p per day. Are you sure you want to bother collecting that?

tbs624

If you haven't already done so, join one of the national LL associations (RLA/NLA) and or LL law. Tax deductible membership fees, discount LL insurance premiums and much useful advice.

Rather than focusing on trying to calculate/collect infinitesimal interest on overdue rent have you been in touch with your T to query the late rent?

*Write* enclosing a rent statement and give them 3-5 working days to bring their payments up to date. If this has happened before then remind them that persistently paying the rent late is a Ground for you to seek repossession of the property.

sequence

If you can't work it out then you probably shouldn't charge it :rotfl:

the_salmon

Cheers guys, I thought it was the latter (IE 4p per day), but then thought that would be pretty pointless (I am on a whole 48p now....), hence my reason for asking.

I am on with getting him to sort his rent out, complicated situation which I was hoping the threat of interest may encourage a swifter payment, but looks like I will have to send the boys round with their baseball bats ;)

Wee_Willy_Harris

Might be more fruitful (and less legally "complicated" than the baseball bats) to work WITH the tenant. ie If he is in rec't of LHA, you can get that paid direct to you. If he's not getting LHA, maybe he should be? Maybe HIS pay day doesn't coincide with the rent due day?

Fire_Fox

Perhaps you should read the harassment section of the Protection from Eviction Act 1977 before you proceed.