View Full Version : How do I calculate interest payable on overdue rent?
13-02-2005, 16:48 PM
I have an agreement whereby a charge can be made for overdue rent 5% above the BofE base rate. Rent is £375-00 per month and in total rent has been 28 days late over a six month period....how do I calculate this please? Therefore 9.75% would be used. I have been using 375 x 9.75% = 35 approx x 28 ---- but this seems extortionate???
13-02-2005, 17:15 PM
Personally I think it is grossly petty to charge interest for overdue rent* UNLESS it is included in a County /court Claim where the rate of interest is I believe laid down as 8%
Using your calculation £375 x 8% divide by 365 and then multipy by 28 equals £2.30 - see now why I think it's petty????
*My view would obviously change if you had £3000 worth of rent arrears which were 13 months late - i.e. £3000 x 8% /365 x 386 = £253.80 - well worth including in a claim of course.
13-02-2005, 17:27 PM
I was asking about how the calculation was done - not whether the clause was fair or not. I signed the agreement with it being 5% over the base rate.
But thank you you have helped. ..I hadn't divided it by 365!!! The whole reason why I was thinking it was a ridiculously high amount!
13-02-2005, 19:37 PM
If you really want to do this, you will have to take the following steps: (assuming you are the landlord, otherwise here are a few tips for the tenant to avoid the charges)
1. read the agreement. If this specifies how the rent is to be paid, eg by standing order to be received in the recipients bank account on the 28th of each month, and cleared funds are received in the recipients bank account on that date, the rent is not late. If the agreement says the rent is to be paid on the 28th, and a cheque is handed to the proper recipient on the 28th, I would doubt that the rent is late even if the cheque takes a few days to clear.
2. ensure that the tenant is not complying with the letter of the agreement before anyone tries to enforce it. If the cash has to be sent to an agent, the landlord can't claim that the rent is late because it doesn't hit their bank account on the due date.
3. check when the rent was late. If its for an aggregate of 28 days in a 6 month period, you have to chart out each period it was late and then apply the base rate at that period. If it was late for 6 days, and BoE rates rose in that period, remember to use the 2 different rates.
If you do want to calculate such interest, and its charged to the tenant, it may be that the fair wear and tear depreciation of the property increases, as the tenant decides that if the landlord wishes to nitpick they really can't be bothered exercising the exemplary duty of care that they did, and then go for the standard version. If they're really vicious, they can always call out the electrician for the intermittant fault in the lights, possibly caused by a loose wire. Try proving that the light flickering didn't happen.
I think you will find that this is actually an unfair term and could not be enforced in court, signed or not !!!
And incredibly petty for £2:50 !!! You should concentrate on having good tenant/landlord relations.
14-02-2005, 12:24 PM
Well not exactly an unfair term, but the LL would have to show he suffered some kind of loss because of the rent being late, he can't just go and charge for something just for some extra profit.
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