Can I charge tenants for extra admin if they are in arrears?

That's a really interesting question Alun and I'm not sure of the answer. Basically you would be passing on the costs of recovery action as opposed to charging for admin wouldn't you? Something in the back of my mind tells me this could be looked upon as you issuing a fine though and I also have a sneaking feeling that might not be allowed and could constitute an unfair contract. However, I'm really not sure of my ground on this one so I have invited some industry experts to share their knowledge.

If what you are suggesting can be done I may well be copying your new strategy myself. It seems to make a lot of sense, especially the point you made about de-personalising the issue and making it very clear that you will not tolerate arrears of any nature.

I think once you have designed a strategy; this would be stated on any subsequent AST.
This would leave tenants in no doubt as to the recovery process.
If you have RGI you effectively have 3 strikes.
This for rent paid in advance would man that after 2 rental months and 1 day the tenant is 3 months in arrears.
My RGI policy gives me 90 days to submit a claim.
If you wish to give the tenant opportunity to pay before you submit a RGI claim you could.
It would be up to you how much forbearance you would allow.

Yes if its in the contract they sign up to ( the AST ) then you can charge for it is my view . As long as it doesnt fall foul of the law and becomes contrary to the Unfair Contract Terms Act.

If Bank of Ireland customers can lose hundreds of pounds due to BoI`s disgraceful action in suddenly raising their SVR rate by invoking one of their special conditions - then charging a bit extra for a legitimate recovery expenditure is fine, The FSA takes no action against BoI for their seemingly unfair contract so I`m sure individual landlords charging a small fee for recovery of debt is not an issue.

Many big institutions charge £20 here £20 there for writing a simple letter or pressing a button on a keyboard so write it on the AST draw their attention to it before they sign on the dotted line and invoke the clause if and when the need arises. Tenants cant say then they havent been warned.....

Hi Alun,
Charging the cost of collection is pretty normal in all debt situations and is certainly acceptable in the event of a moneyclaim through the courts for rent arrears etc. I also have an admin charge in my AST for 'missed payment letters' I send to tenants. The key is show your charges in the AST and they must be reasonable in amount.

Interesting question Alun. Yes it's quite common for you to charge tenants for extra admin fee if they in overdraft. It's important that you state this within the Terms and Conditions on the contract, as you can always go back on it.

Hi Alun,

As others have commented, if it is in your AST and it is a reasonable cost then there should be no reason why you cannot charge this back to the tenant. Here at The Online Letting Agents we use this phrase in our AST - "If the Tenant is in breach, he acknowledges that he may be liable to pay reasonable costs incurred by the Landlord". Clearly the tenant is in breach of their contract if they are in arrears. You may want to expand the point by mentioning that this may include, but is not limited to, the issuing of letters and notices, instructing debt recovery agents etc etc.

Hope that helps!

Eleanor

To comply with The OFT rules ensure you have a contract, policy or terms and conditions in place that allows for the addition of fees to the consumer debt. The OFT will prohibit such action unless this is in place and therefore we as a debt collection agent would be unable to pass our charges on to your customer for historic debts.

I've not used any of the debt collection agencies mentioned on this site recently - I don't have any UK arrears at the moment, and I'm put off by the trace fee for historic debts.
However it seems from the posts here that it would be preferable for the debt collectors to add their fees to the amount they are chasing. It obviously makes sense to add something to the contract stating this might happen, but isn't it the norm that collection costs are added to the debt in all sorts of situations - private parking charges springs to mind, without prior warning?

@JohnF - it's a good point you make. I've just had a successful trace come back and I have asked for my claim to be increased by £69 + VAT which is the trace fee plus the 15% collection charge.

The 21 day process starts now so it will be interesting to see what happens.

In truth I may be taking a bit of a flyer as I don't have a clause regarding collection charges in my AST. However, as you rightly point out, fees are added to collection bills as a matter of course by most collection companies so it may well just be taken for granted that fees need to be paid by my debtor. Only time will tell.

To be honest, anything I get back will be a bonus and it's worth £69 + VAT to me just to know that they will be getting letters and phone calls which will no doubt make their lives a little less comfortable - not that I hold grudges of course 😉

Alun, as you've raised the prospect of referring current tenants to debt collectors, how will this affect ongoing rent payments. Let me give an example.
Rent is £500pm. Tenant loses job and starts paying £400pm. You refer to agency with £200 arrears. Next rent due date, tenant pays £200 arrears to agency (who pay you £170), and £200 to you. You've just lost £30!