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Default Interest on late Rent payments
Any good Lease should provide that the Landlord can charge interest on any monies that are in arrears.
Commonly known as Default Interest, our Leases provide that once any monies are more than 7 days in arrears, the Landlord is entitled to charge Default Interest on all of the amount owing (including GST) at the rate of 2% per annum above the Commonwealth Bank Overdraft rate and that this starts from the day the monies became due, (not 7 days after they were due).
Here is a simple example and a formula that you can follow.
Let’s say that the Monthly Rent is $2,200 (plus GST) each month (a total of $2,420) and the overdraft rate is 9.5% and the Tenant is 12 days late.
The calculation is as follows: -
12 (Days late) divided by 365
multiplied by 11.5% (2% above the overdraft rate)
multiplied by $2,420 (the amount due)
which gives a total Default Interest of $9.15 for the 12 days overdue period.
If the Rent is still not paid going forward, you can repeat this calculation daily, weekly or monthly until your invoice is paid. Obviously, the ‘Days late’ figure and the ‘Amount Due’ will change over time.
I’m sure some of you will be a bit confused with this, so please feel free to give me a call if you need a bit of help.