Late rent fees and interest, what is allowed

Why it matters

A single prohibited fee can trigger a financial penalty and can block possession routes until the money is repaid.

Legal requirements

• Interest on late rent is limited to three per cent above the Bank of England base rate.
• Interest can only be charged once the payment is fourteen or more days overdue.
• Interest runs from the date the rent fell due, not from day fifteen.
• Administration or chasing fees for late rent are prohibited payments.

Common mistakes

• Adding a flat fee for a reminder letter or a phone call.
• Charging interest from day one of arrears.
• Applying a rate written into an old agreement that exceeds the cap.
• Deducting interest from the deposit without a clear contractual basis and evidence.

Practical guidance

• Check the interest clause in your agreement matches the current cap wording.
• Decide a house rule on whether you charge interest at all, and apply it consistently.
• Send a plain reminder on day one rather than a chargeable notice.
• Repay any prohibited payment immediately if one has been taken.

When charging interest is not worth it

On a typical monthly rent, interest for a few weeks is small money. The cost of the relationship damage and the risk of getting the calculation wrong usually outweighs the sum recovered. Many experienced landlords reserve interest for persistent late payers and waive it for a first slip, which keeps goodwill while preserving the right.

Recording the charge properly

If you do charge, show the calculation on the rent statement: the balance overdue, the number of days, the rate applied and the resulting figure. An unexplained lump sum on a statement invites a challenge, while a transparent calculation rarely does.