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paper_mache
01-03-2010, 23:11 PM
I've moved into a house as a lodger and signed a "law pack" Lodger agreement. After a closer look the agreement has been altered to charge 100% interest compounding daily on late rents. Is this enforceable?

If my rent of £435 is late by 1 day it will cost me £870
If my rent of £435 is late by 2 days it will cost me £1740
If my rent of £435 is late by 3 days it will cost me £3480....

As I understand it I'm not covered by the office of fair trading unfair terms.

thevaliant
01-03-2010, 23:21 PM
Probably nothing BUT:

1. 100% daily(?!). I doubt it could be collected. Remember these people will be lodgers. They are unlikely to have any assets you could seize.
2. If it came to court, I doubt the judge would view it in a very favourable light, which could make other clauses called into question.
3. The compounding element would make it look ridiculous within a few days. £200 per months say, one week late, would be £12,800 after a week. If they were a month late, that would be £26.843 billion. Not going to collect that are they?

Lawcruncher
01-03-2010, 23:21 PM
Please answer this question what is there to stop someone who has no previous history of letting property renting out a room in the house they live in to a lodger under a standard lawpack tenancy agreement and changing the interest rate on outstanding balances to 100% compounding daily?

The law on contractual penalties for a start.

paper_mache
01-03-2010, 23:55 PM
The law on contractual penalties for a start.

Can you give further direction on the as I can't find anything relevant on google?

jta
02-03-2010, 01:25 AM
So if you are a month late you are going to owe just over a gigazillion quids.I hope you have a high paying job. :D

paper_mache
02-03-2010, 05:36 AM
So if you are a month late you are going to owe just over a gigazillion quids.I hope you have a high paying job. :D

I have saved a few thousand pounds for a car I want to buy so unless a judge could overturn it my money would be at risk. Plus I could be made bankrupt.

Under what Law / Statute / Body could the interest charage be overturned? Or how could I appeal Being a contract between two individuals normal rules don't apply.

Lawcruncher
02-03-2010, 09:10 AM
Can you give further direction on the as I can't find anything relevant on google?

http://www.gillhams.com/articles/326.cfm

I think it likely that the UTCCR will apply.

matthew_henson
02-03-2010, 09:22 AM
A penantly has to represent the cost involved in administering the late payment. In the case of your landlord there is clearly no cost here as the best they will have do is say "oi sunshine you owe me the rent" secondly any charge for interest has to be reasonable (you will note the banks all reduced their unauthorised overdraft rates to ensure they did not lose the OFT case)

A reasonable interest rate clause would be the Bank of x standard overdraft rate +2% for example.

The joy of lodging is that you can just to quote Monty Python... run away!!!! and not leave a forwarding address and there is bugger all the LL can do about it. The downside is the LL and say I don't like you anymore and throw you out with little notice.

I certainly would never pay their stupid interest rate it is unemforceable, however you have learned a lesson I hope, read a contract before you sign it.

Personally I would just pay the rent on time as you should anyway and see if the LL is a nice person. If not just find somewhere new and pack up and leave

Mars Mug
02-03-2010, 13:52 PM
100% compound interest per day would mean that rent a month late (say 30 days) would leave you owing;

£435 * (2 to the power of 30) = £435*1,073,741,824

That’s £467,977,693,440

Should go some way to covering the National Debt.

Pretty much an unenforceable clause, by the time it gets to court there would not be enough money left on the planet to pay him.

GJMSurrey
02-03-2010, 15:41 PM
*sniggers*

Snorkerz
02-03-2010, 16:14 PM
As others have said, it's probably unenforceable in law - however the lawpack agreement which has been edited probably shows interest at an annual rate. Therefore, 100%pa simple interest is 0.274% per day.

So,

If my rent of £435 is late by 1 day it will cost me £870 £436.20
If my rent of £435 is late by 2 days it will cost me £1740 £448.14
If my rent of £435 is late by 3 days it will cost me £3480 £460.43

Even at this much more reasonable rate, it is still likely to be regarded as unfair by the courts

EDIT: I wish it was really this easy to save 3 grand in 3 days :)

paper_mache
02-03-2010, 22:04 PM
I think it likely that the UTCCR will apply.

Doesn't this only apply when one side is a business and the other is a consumer? Or to all contracts?

"seller or supplier" means any natural or legal person who, in contracts covered by these Regulations, is acting for purposes relating to his trade, business or profession, whether publicly owned or privately owned;

Based on this quote from the statue it seems as though it does not apply?

paper_mache
02-03-2010, 22:18 PM
100% compound interest per day would mean that rent a month late (say 30 days) would leave you owing;

£435 * (2 to the power of 30) = £435*1,073,741,824

That’s £467,977,693,440

Should go some way to covering the National Debt.

Pretty much an unenforceable clause, by the time it gets to court there would not be enough money left on the planet to pay him.

But the judge cant just say it a big number so it's void! The landlord could still take everything I have to cover it which I guess is the intention.

thevaliant
02-03-2010, 22:45 PM
But the judge cant just say it a big number so it's void! The landlord could still take everything I have to cover it which I guess is the intention.

I think you're worrying over nothing. There is no possible way it could be enforced.

westminster
02-03-2010, 23:13 PM
But the judge cant just say it a big number so it's void!
Oh yes he can. £400 billion isn't just 'big', it's ludicrous. No court in the land would find you liable for that for paying £435 a month late.

paper_mache
03-03-2010, 05:25 AM
Oh yes he can. £400 billion isn't just 'big', it's ludicrous. No court in the land would find you liable for that for paying £435 a month late.

Can judges exercise there own discretion against Statutory Instruments?

In my gut I don't think it can be enforced but have found no supporting evidence and it will bug me till I do.

matthew_henson
03-03-2010, 07:31 AM
The unfair terms and conditions in consumer contracts act 1999 will protect you against a spurious clauses in your lodging contact. It was put in place to prevent unfair terms in contracts signed by the consumer being enforceable.

You are considered a consumer in this agreement

You really have no need to worry, as a lodger you have very little protection under tenancy law but nor does the landlord. You really are just about free to walk away at any time.

Where a debt is owed a judge in the small claims court would typically apply a an interest rate based on the inter bank lending rate for the duration the debt is owed. You clause would be seen as a penalty and penalties are not allowed in consumer contracts

Snorkerz
03-03-2010, 07:59 AM
Just for clarification for the OP, under UTCCR your landlord is a business (well for any reason, he's a business - does the tax man know?) so, as others have said you'd almost certainly be covered by that.

Ultimately, when a question comes up about a landlord who does something dodgy, we always come around to the question - what else is he doing / not doing that he shouldn't?

I don't know if this applies (it should), others will comment, but are 'lodger' properties covered by the Gas Safety Regulations?

Mars Mug
03-03-2010, 07:59 AM
Paper_mache, are you sure that what Snorkers suggested isn’t the case, i.e. the stated interest rate is per-annum (PA) which would make real sense?

If this were an AST with those interest rates the landlord would not be able to take you to court until you were at least a month behind in payments (two months due) so the court claim against you would already state that you owe £400 billion. It would get no further. But if by some miracle it did get to court, on the day (several weeks later) you would be looking at £400 billion multiplied several billion times more, that’s more money than exists on the planet.

The clause can only be enforced by a court ruling, and that’s simply not going to happen. The landlord cannot simply take everything you own because he claims you owe it.

One further question I have for the legal people on the forum is, if there is a typo and ‘PA’ is missing, is any kind of interest charge from the landlord allowed? Could the landlord try to charge the sensible ‘PA’ rate when the rate stated in the agreement is clearly wrong?

Snorkerz
03-03-2010, 09:46 AM
Worth noting that court fees for (say) £400bn would be £1530, the allocation fee would be £200 Pre-trial £100 and the hearing fee of £500 or £1k.

westminster
03-03-2010, 11:40 AM
Schedule 2 of the UTCCR 1999

INDICATIVE AND NON-EXHAUSTIVE LIST OF TERMS WHICH MAY BE REGARDED AS UNFAIR

includes...


(e)
requiring any consumer who fails to fulfil his obligation to pay a disproportionately high sum in compensation