Why can't we charge interest?

If we default on our loans we are charged penalty interest.
If we default on council rates we are charged penalty interest.
If a tenant defaults on their rents we have to wear it until they pay.
How come we can't charge penalty interest?
 
I'd never actually thought of it like that. A very good point Brenda. Could we, if it was a caluse in the rental agreement?

Lou
 
Good luck; what are you going to use as an incentive?

If they can't/won't pay the rent; what makes you think they'll pay the interest? They'll just do a runner/trash the place first.

Unless it is Govt legislation it won't happen.

Is knee-capping still illegal?
 
I had a look at a lease on units in Dan St Clontarf about a week ago and the tenents had agreed to pay rent at 210p/w with a $20 discount each week if the rent was paid on time.
 
Brenda,

I don't know if collecting a few $ extra is worth the hassle.
The interest cost to you for $200 or so in rent is not much and if you are negative gearing you are also getting money back from tax.

A penalty for being late could possibly provide an incentive for the tenant not to fall behind with his rent payments.
In this tight rental market we could possibly add a penalty clause in our rental contracts but the rental market is somewhat regulated and I don't now how such a clause would stand in court.

Also, such a clause could give tenants a reason to try and fight the case so we could get dragged to tribunals and could lose even more time & money.

I try to keep things simple. If any of my tenants don't pay on time and they don't have a VERY good reason for it then I always increase their rent.

I had some tenants who every a couple of months would fall behind 2-3 weeks. I decided to increase their rent and they moved on.

Cheers
 
Brenda
I believe there is a reason why you can't charge interest. I'm am not sure of the actual legality but I do know it is illegial for suppliers to charge you interest for late payment of invoices - doesn't stop them from trying. I think its something to do with the credit act. Maybe someone else has better info
 
Hi

Some years ago the neighbour of one of my properties wanted to fence.

Fair enough, the common fence was literally falling down, and as they agreed to install a higher fence that was OK with me.

She did the running around getting quotes, and wanted to use a particular fencing contractor. I had suggested my usual contractor but he was booked out, so in due course I received the 'half share' bill which I signed and faxed back to the contractor.

With a few alterations.

I crossed out and signed the penalty clause ie x% interest if the account was not paid within 48 hours of the fence being finished, and some other rubbish clauses

So a date was agreed and the timber appeared in a heap on the nature strip. Then the contractor decided that as the neighbour had a shed against the boundary that they would have to prefabricate a section of the fence and that this would increase the cost by eg $100.

So out came a new invoice, which again I crossed out and signed the penalty clause and faxed it back.

Within minutes, a very irate Mrs Contractor rang and abused me in no uncertain terms regarding the alterations. I asked her for her Finance Provider registration number and other details of their legal capacity to 'provide finance'.

She became almost hysterical, eventually screaming down the phone that the 'deal is off' and that they would not, under any circumstances, deal with me.

I then contacted my fencer of choice, who rang these disgruntled people and offered to buy the timber from them, but they hung up on him.

Darren then did the fence the next week, I paid the invoice, and everyone was happy.


Many people are simply ignorant of the law. They think they can put something on a scrappy invoice and putting it there makes it legal. It doesn't. The fact that most consumers get one or two fences done in a lifetime - if that - means that consumers are vulnerable to exploitation.

Fair enough, the contractor wants to get paid, and we want to collect rents on time, but we are not finance providers, we are not providing credit, and the provisions of residential leases are determined by law with remedy for late payment offered by the courts.

We are out of pocket by nearly $2,000 from our most recent eviction. The tenant has obviously no intention whatsoever of paying the rent arrears. However, there is not much I can do except apply to the Magistrates Court to have the debt officially recognised and then either make an insurance claim or set the debt collectors on to her.

Either way costs me more money which I cannot recover, but at the end of the day it comes down to this: It is a nuisance and very annoying when people do not keep up their end of a bargain, however I have learned to just say 'bugger', deal with it and move on.

I have learned much from being a landlord and the value to me of the properties far exceeds a month or two of rent here or there. So of course I would like to be able to charge interest, I would like to have tenants who respect the contract of the lease, but in the scales of life it is neither here nor there.

Cheers

Kristine
 
Brenda,

If you left a servo without paying, if you stole $1,000's of dollars of goods, if you caught a train without paying for a ticket and you got caught you would be fined or given a criminal record.

If you don't pay your rent, refuse to move out, stretch the tenancy laws to the max and are eventually forced out leaving all your fly blown rubbish overflowing, mattress and lounge on the front lawn for all to see, the property unsecured, the keys not returned, the walls of a recently renovated property smashed in, you are rewarded with emergency housing, new appliances and no criminal charges.

Oh and by the way, according to the Tribunal you can't be forced out prior to Christmas, "there's children involved".

I believe a Tribunal would rule against a landlord who wanted to charge interest, even if the payment is clearly listed in the agreement. In fact if the case came before them I can see the landlord having to repay the tenant any previous interest payments with interest. After all, tenants need protection from greedy landlords.


Regards

Andrew
 
I'm with WBG Redcliffe - I think incentives are the way to go. Pad the rent with, say, $10 or $20 extra per week, then offer them (if it's $10 per week), a $500 bonus each December 1st (just in time for Christmas shopping) if they've paid their rent on time all year, for example.

I also try and be nice to tenants by doing very small things that cost me little but mean a lot to them - a box of chocolates for the inconvenience of repairs (if it genuinely inconveniences them, eg hot water service breaks through no fault of theirs). Or a pair of movie tickets for being stuck without a stove for the weekend, things like that.

We can't use sticks, so may as well use carrots ;)
 
Hi Brenda,

We have a tenant that was always late with the rent. But we sorted her out: I increased the rent last year and then offered her a free weeks rent at Christmas if see paid on time each week. So she now pays on time every time and is really grateful for the Christmas bonus.

A win/win situation which she pays for.

Cheers,

Bazza
 
Or you could add in the leasing agreement that the rent will be paid
by direct debit from their nominated bank account.

My PM's have this clause in their leasing agreements.

It's a good thing because if a payment doesn't go through
the system will prompt them and they will immediately chase up the tenant.

With a manual payment system it could be several weeks before they realise that someone hasn't paid his rent.

Cheers
 
Here, in Nova Scotia, we can't charge interest, but we are permitted to charge 1 % of the rent per month as a late charge.So even if they are a $1 short we can(and do) charge that monthly late fee.Many times we take it from their bond when they leave.
 
I had a look at a lease on units in Dan St Clontarf about a week ago and the tenents had agreed to pay rent at 210p/w with a $20 discount each week if the rent was paid on time.

I think this is a great incentive / insurance policy.

Have you seen this work before? How does it work in practice with a tenant who gets behind - how hard is it to get that extra $20/wk 'discount' back off them if they are late?

Cheers

TB
 
I think this is a great incentive / insurance policy.

Have you seen this work before? How does it work in practice with a tenant who gets behind - how hard is it to get that extra $20/wk 'discount' back off them if they are late?

Cheers

TB

As mentioned previously, I get the tenant to pay the increased amount then give her a weeks free rent at Christmas. I wouldn't like to try getting it back it she defaults on the deal.

Cheers,

Bazza
 
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