How not to be treated as a source for cheap creditMake Text Bigger
We landlords are not in the business of lending money to our tenants but that is in effect what we are doing when they run up rent arrears.
The trouble is it is far easier for someone NOT to do something than it is to DO something, ie it is far easier NOT to pay rent than it is to borrow the money from someone who is in the business of lending e.g. a bank. What’s more, unless we have a very good system in place the penalty for running up arrears is very small and the consequences very far away, i.e. at least six months to evict.
I need to improve my system.
Not only shall I start to issue formal rent demand notices, first a polite reminder, followed by a stronger letter then followed by the appropriate action.
I would also like to introduce a financial incentive so that tenants pay me before they spend the money on something else. Unfortunately the poultry “base plus 4%” interest rate that is the acceptable standard is very little incentive and other fixed fees are very difficult to enforce. So I am thinking of introducing a *prompt payment discount*.
I would like to put the rent up by a reasonably significant amount, say £10 a week and offer a prompt payment discount of the same amount. Then each week a tenant is in significant arrears it will cost them £10, that should make them realise that it’s not a cheap loan any more.
Has anyone used this method?
How did it work?
What wording did you use for a clause in the tenancy?
In addition to writing this into all new tenancy agreements from now on I would like to try and introduce this to existing tenancies. I can put the rent up with a formal Section 13 rent increase notice but I doubt I could include a discount clause as this would in effect create a new version of the tenancy with all the ensuing complications. How can I introduce the discount? Can I put something in writing outside the Section 13 notice or would this too change the existing tenancy? Can it be left as an unwritten gentlemen’s agreement?
If we work together on this we can build a better system for us all.
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