Can I make a charge if my tenant has not paid rent?

paymentIn the past, it has been common for landlords to provide in their tenancy agreements for penalty payments in the event of tenants failing to pay their rent.

Sometimes landlords and agents have also made a charge for sending letters.

In Wales the Renting Homes (Fees etc.) (Wales) Act 2019 has prohibited most fees but permits ‘default fees’ so long as they are set out in the tenancy agreement and (under the unfair terms legislation in the Consumer Rights Act 2015) are not ‘unfair’.

In order to conserve consistency across our agreements we have therefore included the same interest clause for rent arrears that we have in our English agreements.

In this clause, the only charge which a landlord is entitled to make is interest which can be charged on unpaid rent if the rent is unpaid for a period of 14 days or more.

However, if the rent is unpaid for 14 days, any interest is chargeable from the day the rent fell due until payment.

The interest rate chargeable is 3% above the Bank of England base rate and is payable for each day that the payment is outstanding.

Bank of England Base rate

This is the rate that the Bank of England charges to borrow money. Find out more at the Bank of England website: bankofengland.co.uk.

How to cancel the interest due:

If the Bank of England base rate is at  0.75% (you can check this here):

Calculation

  • Arrears x 0.0375 = Annual arrears you can charge
  • Annual arrears ÷ 365 = Daily interest
  • Daily interest x Number of days rent outstanding = Interest due

Example – £500 rent arrears and 26 days outstanding
500 x 0.0375 = £18.75
18.75 ÷ 365 = £0.051
5.1p x 26 = £1.34

Note that the Welsh Assembly has reserved the right to amend the legislation and that all things will change anyway when the Renting Homes (Wales) Act 2016 is brought into force, expected some time in 2021.

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