Late rent charge

This looks like a standard penalty interest clause lifted from banking/loan agreements and whilst not specific in this case, 5% above Base is almost standard as an annual rate to be used to calculate LPI for corporate loans etc


I think the document is poorly worded - if the penalty interest is only 25p for paying rent late then not much of a disincentive.


£50 might sound crazy but if you can delay paying your rent by paying 7 pence per day, quite a lot of people would never pay it, so there has to be a genuine and painful "penalty" for paying late.

Your assumption was reasonable. If the tenancy agreement does not clearly state that the interest rate is 5% per day, you don't have to pay 5% per day. I would send the agency letter confirming that the tenancy agreement does not say that interest is payable at 5.5% per day, and that 5% per annum is the only reasonable assumption to make. Offer to pay them the 8 pence that you owe them if the interest rate were 5.5% pa.


Even if the tenancy agreement did say the interest rate was 5% above the BoE base rate per day, you still have the protection of the unfair terms and conditions portions of the Consumer Rights Act. This says that charges have to be fair and proportionate. So you can be charged for the time it takes the agency to chase the late payment - say the agency charges staff time at £100 per hour. If they call you, and you make a payment straight away, the charge might be £15. If they have to write you two letters, it might be £50. When charging interest, the interest rate has to be comparable to the interest rate that the landlord would have received had their money been invested somewhere other than the property. So an interest rate of 10-20% per annum or 0.05% per day might be the upper limit of what is reasonable.

The Office of Fair Trading said in 2005 that "We regard a requirement to pay unreasonable interest on arrears of rent, at a rate substantially above the clearing banks' base rates, as an unfair penalty".

5.5% per day is 2007% per annum (and 307 million % more if compounded!). This is so far and above the clearing bank's base rates as to be unfair.

BlueHouse wrote: »

Hi,
I missed my rent payment by 2 days (so it was 2 days late) and now the agency are saying I owe a late fee.

The tenancy says:
"To pay interest on any payment of rent not made as set out in this agreement. Interest is payable from the date on which the rent was due until the date on which the rent was actually paid at the interest rate calculated at 5% above the bank of England base rate." - the reference to dates just defines what period, the interest applies to, e.g. rent due 1st July, paid 3rd July => (2/365) = 0.548% of a year. Doesn't mean you count the number of days and apply 5% to each one.

I assumed the charge was 5.5% interest per annum - so didnt expect a large fine.- I agree, BoE base rate is 0.5% pa or effectively 0.00137% per day. Without indication otherwise, 5% would be reasonably interpreted to being quoted consistently ie 5% pa (or its ambiguous and so assumed to favour the tenant as they didn't draft the doc).
Now I'm being told it's 5.5% per day. So I owe a late fee of £55 (rent is £500). - 5.5% per year = 0.0147%
per day

Is this right?
It was only 2 days late, it's crazy to expect so much for 2 days! - In general I wouldn't say £55 is crazy, there is time involved in having to check accounts, chase for payment,
potential bank charges if they were relying on the money coming in for other payments. You should be paying rent on time,
"only 2 days" is 2 days too many.

However in this case your agreement doesn't provide for a late fee, only interest so they can't charge £55
Thanks in advance!

BH.

westernpromise wrote: »

Based on that language I'd say your interpretation is correct and theirs is unenforceable, like excessive bank charges proved to be. 5.5% per day is based on no actual cost and was constructively a fine.

I agree 5.5% pa is high, but not necessarily a fine, as its still small figures.. a £1000 rent being a whole 3 months late is still under £5 so hardly excessive. Also It could reflect interest in a high return S&S ISA or overdraft interest if the LL had to fund outgoing payments due to late rent.
5.5% per day is a different story (and not properly explained in the agreement if that's what they meant, so definitely not what was agreed)

As others say, the only reasonable interpretation of the contract is 5.5% per year.

However, you probably breached the contract - so they could claim reasonable costs that they incurred as a result of that breach.

For example, if they phoned you or sent you a letter, because you didn't pay - perhaps they could argue that they incurred costs of £5 to £20 (based on hourly staff costs etc) as a result of your breach.

Pixie5740 wrote: »

Could they claim those costs from the OP? Aren't those the costs of managing the property which is what the landlord is already paying the agent to do?

some may say they are over and above the standard offered terms.

Its likely to be classed as extra work as its not an expected thing for a tenant to pay late maybe