Service charge arrears interest rate -- trying to figure out prime rate

touchdown77

Hope you can help.


I'm on a management board of an OMC and we're trying to figure out how the calculate the interest rate is on arrears.


The lease states;
"...rate which shall not exceed the current prime rate charged by the Associated Banks in the ROI for loans to individuals by four per cent or if there should be no such rate corresponding at the nearest appropriate rate thereto at the date upon which the said sum or sums fall due or become payable"


So there doesn't appear to be a published "prime rate for personal loans" anymore (the lease is dated from 1988)


So whats the appropriate alternative?

Peregrinus

Classically, the "prime rate" is the best rate at which a non-bank can borrow from a bank - the rate available to the most creditworthy customer.

So the "current prime rate charged by the Associated Banks in the ROI for loans to individuals" would be the cheapest borrowing rate offered to individual customers by any of the Associated Banks (Bank of Ireland, AIB, Ulster Bank, Danske Bank). This is generally understood to mean the cheapest rate for unsecured borrowings (so you can disregard mortgage rates, etc) and also to exclude promotional rates that are only available to selected borrowers - e.g. new customers, students.

This is quite difficult to establish, especially retrospectively, but the Central Bank does publish monthly statistics on (among other things) retail interest rates for loans to "households" (as opposed to businesses). They, I think, give you the average interest rate charged by all the retail banks, as opposed to the lowest interest rate charged by one of the big four, but it's probably a reasonable proxy.

Dav010

Op I was an omc director for 10 years, non payment of yearly fees by property owners was a constant issue. The legal advice we got was that interest rates would be difficult to enforce, also, owners who could or would not pay became more entrenched about not paying because of what they felt was a unfair penalty. We were forced in some cases to apply for liens on properties. We found that communication, when possible was the best option, we agreed to delayed payments rather than interest penalties to facilitate the owners, the carrot worked better than the stick.

touchdown77

Dav010 wrote: »

Op I was an omc director for 10 years, non payment of yearly fees by property owners was a constant issue. The legal advice we got was that interest rates would be difficult to enforce, also, owners who could or would not pay became more entrenched about not paying because of what they felt was a unfair penalty. We were forced in some cases to apply for liens on properties. We found that communication, when possible was the best option, we agreed to delayed payments rather than interest penalties to facilitate the owners, the carrot worked better than the stick.

Yes same experience as that, OMC's are left in very difficult situations when it comes to non-payers.


Have you ever tried to withdraw/restrict car parking privileges?


In our development the OMC owns the parking spaces and each owner has the right to use one designated space.

We are considering changing the gate code so they can no longer access the car park but it would only be implement as a last resort. I'm reading elsewhere on boards that this move may infringe their rights in their lease--even though they have not paid service charges so could cause more trouble than its worth.