Do you want your tenant to pay by direct debit? It is not as simple as saying “you must pay by debit”.
What do you do after you have mandated direct debit?
In a prior article, we explain direct debit in the context of a lease. We also give reasons why you as landlord should mandate it. Here, we will share some secrets to drafting the clause. It is not as simple as saying “you must pay by debit”. This is just the start.
Secrets to a direct debit clause
There are different types of payments in a lease. Some are monthly. Others are a once off. The lease needs to cater for both these situations. Where the payment is monthly, the debit should be automatic on the due date. Where the payment is a once off, the lease must allow you to debit on demand.
You should not have to give any notice of a debit for once off payments. Not giving notice helps you test whether the tenant can still afford the lease. See our prior article for more detail on this.
You need a duty on the tenant to do all acts to allow the debit it occur. This should include a duty to arrange and sign all bank forms. It should include a duty to give bank details and update them from time to time. It should also include a duty to make sure there are enough funds in the account at all times.
What about the account? Does it matter which account you debit? It can do. When a tenant is going south, the first thing they often do is start ranking creditors. You do not want to give the tenant any option of paying others before you. Therefore, you want to make sure that the account you debit is the tenant’s main bank account. Not a dummy account. You need the account where the tenant first receives their income.
Who do I speak to about direct debit in a lease?
We are the experts in all things leasing. If you want to know more about direct debit or any other leasing matter, contact us here or below.
This article is not legal advice. You should get independent legal advice to deal with your situation.
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