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  • FIRST POST
    • BlueHouse
    • By BlueHouse 9th Jul 18, 9:10 AM
    • 1Posts
    • 0Thanks
    BlueHouse
    Late rent charge
    • #1
    • 9th Jul 18, 9:10 AM
    Late rent charge 9th Jul 18 at 9:10 AM
    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."

    I assumed the charge was 5.5% interest per annum - so didnt expect a large fine.
    Now I'm being told it's 5.5% per day. So I owe a late fee of 55 (rent is 500).

    Is this right?
    It was only 2 days late, it's crazy to expect so much for 2 days!
    Thanks in advance!

    BH.
Page 1
    • Brock_and_Roll
    • By Brock_and_Roll 9th Jul 18, 9:21 AM
    • 860 Posts
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    Brock_and_Roll
    • #2
    • 9th Jul 18, 9:21 AM
    • #2
    • 9th Jul 18, 9:21 AM
    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.
    • westernpromise
    • By westernpromise 9th Jul 18, 9:28 AM
    • 4,263 Posts
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    westernpromise
    • #3
    • 9th Jul 18, 9:28 AM
    • #3
    • 9th Jul 18, 9:28 AM
    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 would go back and say that while you are sure that is what they would like the contract to mean, that is not what it actually says, and you accept no liability beyond what it actually says.

    Furthermore, the BoE rate is expressed as a per annum rate, so it is simply incoherent to argue that a third party's published annual rate can be applied as a component of a daily charge.

    And I say that as a landlord.
    Buying a house, if you believe the market has a way to fall, or if you are paying sill asking prices ( like some sheeple ) or if you are buying in London, is now a massive financial gamble!!!!! - June 8, 2012 by TheCountOfNowhere
    • tacpot12
    • By tacpot12 9th Jul 18, 9:30 AM
    • 1,367 Posts
    • 1,177 Thanks
    tacpot12
    • #4
    • 9th Jul 18, 9:30 AM
    • #4
    • 9th Jul 18, 9:30 AM
    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.
    • agrinnall
    • By agrinnall 9th Jul 18, 9:31 AM
    • 20,949 Posts
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    agrinnall
    • #5
    • 9th Jul 18, 9:31 AM
    • #5
    • 9th Jul 18, 9:31 AM
    I'd be reasonably confident that a court would interpret that clause as meaning a per annum interest rate, as the BoE base rate is generally taken to mean that. How keen are you in staying in the property at the end of your current tenancy? If you're prepared to risk a S21 I'd be tempted to call their bluff and let them take me to court. I might also contact the LL to protest against the agency's interpretation of the charge.
    • saajan_12
    • By saajan_12 9th Jul 18, 9:56 AM
    • 1,428 Posts
    • 1,039 Thanks
    saajan_12
    • #6
    • 9th Jul 18, 9:56 AM
    • #6
    • 9th Jul 18, 9:56 AM
    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.
    Originally posted by BlueHouse
    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.
    Originally posted by westernpromise
    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)
    • need an answer
    • By need an answer 9th Jul 18, 9:57 AM
    • 943 Posts
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    need an answer
    • #7
    • 9th Jul 18, 9:57 AM
    • #7
    • 9th Jul 18, 9:57 AM
    Was there anything mentioned regarding an admin fee?
    in S 36 T 57 F 57
    out S 51 T 60 F 65
    2017 -32
    • eddddy
    • By eddddy 9th Jul 18, 10:11 AM
    • 6,888 Posts
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    eddddy
    • #8
    • 9th Jul 18, 10:11 AM
    • #8
    • 9th Jul 18, 10:11 AM
    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
    • By Pixie5740 9th Jul 18, 10:13 AM
    • 12,908 Posts
    • 18,552 Thanks
    Pixie5740
    • #9
    • 9th Jul 18, 10:13 AM
    • #9
    • 9th Jul 18, 10:13 AM
    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.
    Originally posted by eddddy
    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?
    • need an answer
    • By need an answer 9th Jul 18, 10:22 AM
    • 943 Posts
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    need an answer
    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?
    Originally posted by Pixie5740
    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
    in S 36 T 57 F 57
    out S 51 T 60 F 65
    2017 -32
    • scaredofdebt
    • By scaredofdebt 9th Jul 18, 10:30 AM
    • 1,141 Posts
    • 544 Thanks
    scaredofdebt
    I would expect a large reason for rent payments being late is due to the tenant having financial difficulties, so making them pay in essence what is a fine is only going to exacerbate the problem. Still, if it makes a few quid in the short term.

    I am a landlord and my tenant (who I would consider a good one) has been late paying the rent 2 or 3 times in the past 4 years, each time they've contacted me about it citing problems with their bank and they've made the payment a day or two later.

    I am happy with that, it's not costing me anything apart from a small amount of worry and as long as the tenant is up front about it then no problem.

    As a tenant myself when I was in my 20s, I know what it's like, a bit of empathy goes a long way.

    Legally, unless the contract explicitly states the interest is payable daily, it would be assumed to be annually and in any case I suspect they are legally obliged to show the APR as banks are with their "fines".

    5% a day would be a nice APR!

    IANAL
    Make 2018 in 2018 Challenge - Total to date 2,108
    • eddddy
    • By eddddy 9th Jul 18, 10:32 AM
    • 6,888 Posts
    • 6,808 Thanks
    eddddy
    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?
    Originally posted by Pixie5740
    I'm referring to additional costs which arose purely because the OP paid late...

    ....because presumably the OP breached the contract (AST) which said the OP had to pay on a particular date.

    If one party breaches a contract, the other party is entitled to claim their reasonable consequential losses.

    But they cannot charge 'fines' or 'penalties'.
    • need an answer
    • By need an answer 9th Jul 18, 10:33 AM
    • 943 Posts
    • 1,153 Thanks
    need an answer
    I would expect a large reason for rent payments being late is due to the tenant having financial difficulties, so making them pay in essence what is a fine is only going to exacerbate the problem. Still, if it makes a few quid in the short term.

    I am a landlord and my tenant (who I would consider a good one) has been late paying the rent 2 or 3 times in the past 4 years, each time they've contacted me about it citing problems with their bank and they've made the payment a day or two later.

    I am happy with that, it's not costing me anything apart from a small amount of worry and as long as the tenant is up front about it then no problem.

    As a tenant myself when I was in my 20s, I know what it's like, a bit of empathy goes a long way.

    Legally, unless the contract explicitly states the interest is payable daily, it would be assumed to be annually and in any case I suspect they are legally obliged to show the APR as banks are with their "fines".

    5% a day would be a nice APR!

    IANAL
    Originally posted by scaredofdebt
    I totally agree with you however where the situation may be different I assume you and indeed I do not use a managing agent for rent collection whereas the OP's LL clearly does.
    in S 36 T 57 F 57
    out S 51 T 60 F 65
    2017 -32
    • Pixie5740
    • By Pixie5740 9th Jul 18, 10:38 AM
    • 12,908 Posts
    • 18,552 Thanks
    Pixie5740
    I'm referring to additional costs which arose purely because the OP paid late...

    ....because presumably the OP breached the contract (AST) which said the OP had to pay on a particular date.

    If one party breaches a contract, the other party is entitled to claim their reasonable consequential losses.

    But they cannot charge 'fines' or 'penalties'.
    Originally posted by eddddy
    What exactly are landlords paying for when they plump for a fully managed service if not for the occasional letter or phone call?

    I find it difficult to believe that it would cost the letting agent 5 to 20 to send out what is probably a template letter or make a phone call that's if they even did either of those things. Not that it matters because the way the tenancy agreement is drafted won't result in the OP paying anywhere near as much as 5.
    • need an answer
    • By need an answer 9th Jul 18, 10:51 AM
    • 943 Posts
    • 1,153 Thanks
    need an answer
    What exactly are landlords paying for when they plump for a fully managed service if not for the occasional letter or phone call?

    I find it difficult to believe that it would cost the letting agent 5 to 20 to send out what is probably a template letter or make a phone call that's if they even did either of those things. Not that it matters because the way the tenancy agreement is drafted won't result in the OP paying anywhere near as much as 5.
    Originally posted by Pixie5740

    Its not until you look into what you actually pay your LA to manage the property that some LL's actually have a lightbulb moment and say "you know what I can do this"

    I went fully managed for the first year on my first property before I decided to exit.
    I suppose for some its not easy to self manage but actually if you are able to its a big cost saving and much easier to deal direct and quickly with the tenant without the middleman layer

    I also don't think that a lot of LL's especially those who are not confident realise that there are other options like tenant only find which again is a big cost saving from fully managed.

    In my neck of the woods fully managed agreements are offered in preference by a lot of agents almost to the point that unless the client mentions other options they are not offered anything else
    in S 36 T 57 F 57
    out S 51 T 60 F 65
    2017 -32
    • eddddy
    • By eddddy 9th Jul 18, 11:02 AM
    • 6,888 Posts
    • 6,808 Thanks
    eddddy
    You're confusing lots of different things.


    What exactly are landlords paying for when they plump for a fully managed service if not for the occasional letter or phone call?
    Originally posted by Pixie5740
    You're referring to the contract between the LL and agent. That's irrelevant here.

    The contract which may have been breached is the one between tenant and LL (the AST).

    Not that it matters because the way the tenancy agreement is drafted won't result in the OP paying anywhere near as much as 5.
    Originally posted by Pixie5740
    You're confusing 2 separate things.

    1. Fees stated in the AST - i.e. contractual charges
    2. Costs (damages) as a result of breach of contract (which won't be stated in the contract)


    But, by law, if you breach a contract, you are liable for the resulting costs.

    Whether a breach of contract has occurred depends on how the AST/contract is worded.

    I find it difficult to believe that it would cost the letting agent 5 to 20 to send out what is probably a template letter or make a phone call that's if they even did either of those things.
    Originally posted by Pixie5740
    Yes - there is the follow up question of whether the costs (damages) are reasonable.

    The OP needs to find out what the agent did as a result of the late payment, whether what they did was reasonable, and whether the cost the agent quotes for doing it is reasonable.


    Edit to add..

    The agent cannot make a profit or charge a penalty in damages resulting from breach of contract.
    Last edited by eddddy; 09-07-2018 at 11:13 AM.
    • Pixie5740
    • By Pixie5740 9th Jul 18, 11:10 AM
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    Pixie5740
    You're confusing lots of different things.




    You're referring to the contract between the LL and agent. That's irrelevant here.

    The contract which may have been breached is the one between tenant and LL (the AST).



    You're confusing 2 separate things.

    1. Fees stated in the AST - i.e. contractual charges
    2. Costs (damages) as a result of breach of contract (which won't be stated in the contract)


    But, by law, if you breach a contract, you are liable for the resulting costs.



    Yes - there is the follow up question of whether the costs (damages) are reasonable.

    The OP needs to explain what the agent did as a result of the late payment, whether what they did was reasonable, and whether the cost the agent quotes for doing it is reasonable.


    Edit to add..

    The agent cannot make a profit or charge a penalty in damages resulting from breach of contract.
    Originally posted by eddddy
    The contract with the landlord is not irrelevant because the letting agent is not legally charge both the landlord and the tenant for the same thing.

    If the letting agent wanted to charge a cost per phone call or per letter those costs should be specified in the tenancy agreement or at least in the letting agent's front of office and/or website. That said, the OP hasn't actually mentioned the letting agent sending either a letter of making a phone call. It's quite possible that as the rent was only 2 days late (yes I know that's still 2 days too many) that the letting agent did neither.
    • Cakeguts
    • By Cakeguts 9th Jul 18, 12:00 PM
    • 4,856 Posts
    • 7,214 Thanks
    Cakeguts
    There is probably more to this than is stated here. I would guess it is not the first time but I don't know. The reason why I think there is more to this is because managing agents usually ask for rent to be paid by standing order. It looks as if there isn't a standing order in place here.
    • wesleyad
    • By wesleyad 9th Jul 18, 12:19 PM
    • 286 Posts
    • 245 Thanks
    wesleyad
    The contract with the landlord is not irrelevant because the letting agent is not legally charge both the landlord and the tenant for the same thing.
    Originally posted by Pixie5740
    Is this bit true? What about when the tenant renews and the LA charges a renewal fee to both LL and tenant?
    • Pixie5740
    • By Pixie5740 9th Jul 18, 12:26 PM
    • 12,908 Posts
    • 18,552 Thanks
    Pixie5740
    Is this bit true? What about when the tenant renews and the LA charges a renewal fee to both LL and tenant?
    Originally posted by wesleyad
    Yes it is true and the letting agent should only, at most, be charging one sucker a renewal fee.
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