Interest – Base Rate (Minimum Lending Rate)
Leases often require payment of interest on late rent(s) and back rent (shortfall) following an increase at rent review. Generally, interest is Base Rate plus or minus x%, or a fixed or minimum percentage. Sometimes, a lease will differentiate between (a) the interest on late rent and other payments described as rent under the lease, and (b) the interest payable on the back rent (shortfall) at rent review. Typically, the interest on rent(s) is described as the Default Rate, and the interest at rent review as the Interest Rate.
At rent review, depending upon the lease, the interest is either payable on the whole of the back rent from the review date or later, depending on the lease, and to the date of payment or another date, depending on the lease, or on each instalment of the back rent as if the revised rent had been agreed on or before the review date. Whether the “each instalment” basis is less expensive for the tenant depends upon the Base Rate at the review date.
Base Rate also has a bearing on investment yields.
MLR Base Rates since 1989: clicking the select list below will reveal the monthly index figures for that particular year.