Late fees and interest on self storage in the UK: what the law says

On 10 October 2026 we found no official source that says whether a flat late fee in a consumer storage contract is a penalty or an unfair term, or whether the Late Payment of Commercial Debts (Interest) Act 1998 covers a storage licence. This guide to UK law is general information, not legal advice.

On our reading of Parliament’s pages, the Commercial Payments Bill, which would change the 1998 Act, was not law as at 10 October 2026.

Is your customer a consumer or a business?

It depends on the customer’s purpose. The Consumer Rights Act 2015 defines a consumer as “an individual acting for purposes that are wholly or mainly outside that individual’s trade, business, craft or profession” (section 2(3)). A trader claiming that an individual was not acting as a consumer “must prove it” (section 2(4)).

The 1998 Act applies to “a contract for the supply of goods or services where the purchaser and the supplier are each acting in the course of a business, other than an excepted contract” (section 2(1)). Which side a customer is on turns on the facts, and is a question for your adviser.

Can you charge a consumer a late fee?

The Consumer Rights Act 2015 answers with a test, not an amount. An unfair term in a consumer contract “is not binding on the consumer” (section 62(1)).

Section 62(4) says a term is unfair if, “contrary to the requirement of good faith, it causes a significant imbalance in the parties’ rights and obligations under the contract to the detriment of the consumer”.

A term escapes that test only so far as it sets the main subject matter, or the question is whether the price is appropriate for what is supplied, and only if it is transparent and prominent (section 64(1) and (2)). CMA37 says the timing, method or variation of payment can still be assessed for fairness (paragraph 5.9).

Schedule 2 lists terms that “may be regarded as unfair” (section 63(1)), and that exemption never covers them (section 64(6)). Schedule 2’s paragraph 6 is a term requiring “a consumer who fails to fulfil his obligations under the contract to pay a disproportionately high sum in compensation”.

What the CMA’s guidance says

The Competition and Markets Authority (CMA) revised its unfair contract terms guidance (CMA37) on 22 July 2026; it covers consumer contracts made anywhere in the UK from 1 October 2015 (paragraph 1.1). On 10 October 2026 we found no passage in it that uses the terms late fee, late payment, arrears or debt collection; its nearest passages are on sanctions for breach and on interest on outstanding payments (paragraph 6.63).

It says terms letting traders “charge reasonably for dealing with problems which arise because of the consumer’s fault or misconduct” may be fair (paragraph 4.18). Paragraph 6.63 says terms imposing “disproportionate sanctions for breach of contract” are more likely to be unfair.

That paragraph lists “a fixed arbitrary sum for any breach, which is disproportionate to any losses from potential breaches”. It also lists “a requirement to pay unreasonable interest on outstanding payments, such as at a rate excessively above the clearing banks’ base rates”. An example marks interest “at the rate of 10 per cent per month” as “Unlikely to be fair”.

Footnote 257 cites Munkenbeck v Harold [2005] EWHC 356 (TCC). It says a clause requiring a consumer to pay interest at 8% above the Bank of England base rate on sums due to a trader “was found to be unfair, even though it constituted a genuine pre-estimate of damage and was not a penalty at common law”.

Paragraph 6.65 says financial sanctions are more likely to be fair if the sum is “objectively proportionate and appropriate for the objective it seeks to achieve” and the trigger “clear, upfront and objectively reasonable”. It adds two conditions: the consumer “can easily avoid” the sanction and “obtained a clear benefit by submitting to the term”.

What is the penalty rule?

It is a court test of a sum payable on a breach of contract, in consumer and business contracts alike. The Supreme Court restated it on 4 November 2015 in Cavendish Square v Makdessi and ParkingEye v Beavis [2015] UKSC 67. This guide does not apply it to any fee.

Paragraph 32 asks whether the provision is “a secondary obligation which imposes a detriment on the contract-breaker out of all proportion to any legitimate interest of the innocent party in the enforcement of the primary obligation”.

On an £85 parking overstay charge, the court held that “while the penalty rule is plainly engaged, the £85 charge is not a penalty”, as deterrence is not penal where there is a legitimate interest beyond recovering damages (paragraph 99).

It also found the term not unfair under the Unfair Terms in Consumer Contracts Regulations 1999 (paragraphs 107 and 114), and said a single charge rather than a graduated one did not make it unfair (paragraph 111).

Our reading, an inference: CMA37 applies this reasoning to the 2015 Act (paragraph 4.19 and footnote 134). Lord Hodge said the rule is “essentially the same” in Scots and English law, but Scottish courts have “in certain circumstances a power to abate the penalty”, meaning reduce it (paragraph 216). We did not check Northern Ireland.

We searched Find Case Law for “self storage” with “penalty”, “unfair term” or “late payment”, and the British and Irish Legal Information Institute (BAILII) for “self storage” with “penalty”. On 10 October 2026 those searches found no reported decision applying the penalty rule or unfair terms law to self storage fees. Find Case Law does not routinely receive County Court judgments.

Can you charge a business customer interest under the Late Payment of Commercial Debts (Interest) Act?

If the 1998 Act applies, a qualifying debt “carries simple interest” (section 1(1)), anywhere in the UK (section 17). On 10 October 2026 we found no official source that says whether a storage licence is a “contract for the supply of goods or services” under section 2.

The rate and the fixed sums

Statutory interest “starts to run on the day after the relevant day for the debt” (section 4(2)). That is the agreed payment day, unless subsection (2D), (2E) or (2G) gives another, or, where none was agreed, the last day of the relevant 30-day period (section 4(2A)).

The rate is “8 per cent per annum over the official dealing rate” on the 30 June or 31 December before interest starts (S.I. 2002/1675, article 4, and for Scotland S.S.I. 2002/336). On 10 October 2026 a title search of legislation.gov.uk found no rate order made after 2002.

Bank Rate was 3.75% on 31 December 2025 and on 30 June 2026. Our calculation, an inference taking the official dealing rate to be Bank Rate as gov.uk’s guide does, is 11.75% a year for interest starting in 2026. For interest that starts to run between January and June 2027 the 31 December 2026 rate applies; the Bank’s next decision is due on 5 November 2026.

Once statutory interest starts, section 5A entitles the supplier to a fixed sum: £40 for a debt under £1,000, £70 for £1,000 to under £10,000, and £100 for £10,000 or more. If the supplier’s reasonable recovery costs are higher, it “shall also be entitled to” the difference (section 5A(2A)).

An illustration, if the Act applies: on our calculation £120 of licence fee still unpaid 30 days after interest starts carries about £1.16 of interest at 11.75% a year (£120 × 11.75% × 30 ÷ 365). The fixed sum for a debt of that size is £40. When interest starts for a fee paid in advance is a separate question; see the section on fees paid in advance below.

On our reading, gov.uk’s guide, last updated 10 August 2016, is shorter than the Act in three places:

• A different rate in the contract. It says “You cannot claim statutory interest if there’s a different rate of interest in a contract”; the Act’s test is a “substantial” remedy (sections 8 and 9).
• Recovery costs. It says a supplier “can also claim for reasonable costs each time you try to recover the debt”; section 5A(2A) gives only costs above the fixed sum.
• The worked example. It assumes a 0.5% base rate, a level Bank Rate last held from 3 February to 17 March 2022.

Agreeing something else

Section 8(1) says contract terms are void “to the extent that they purport to exclude the right to statutory interest”, unless there is “a substantial contractual remedy for late payment of the debt”. With a substantial remedy, statutory interest is not carried unless agreed (section 8(2)).

A remedy counts as substantial unless it is insufficient to compensate or to deter, and it would not be fair or reasonable to let it oust or vary statutory interest (section 9(1)).

Our reading, an inference a solicitor should check: where the Act applies, a late fee is a “contractual remedy” (section 10(1)), so if it is not substantial, the fee and statutory interest could both apply, subject to the penalty rule.

Fees paid in advance

For an “advance payment”, which falls due before the supplier performs, the debt counts as created when the supplier performs or, for a payment for part of the performance, when that part is completed (section 11(3) to (5)). That day is the relevant day for interest (section 4(2G)).

Our reading, an inference with low confidence that needs a solicitor: if the Act applies to a storage licence at all, interest on an unpaid month paid in advance would start the day after that month ends.

What is changing: the Commercial Payments Bill

The Commercial Payments Bill [HL] would reform the 1998 Act; on our reading of Parliament’s pages, it was not law on 10 October 2026. It started in the House of Lords, where its third reading is listed for 20 October 2026, a date Parliament says may be provisional.

No Commons stage is listed, and most of the Bill would start on days set by regulations (clause 32(1)). Its text as amended on Report, dated 15 September 2026, would:

• End contracting out. A term in a contract made after the change starts would be void so far as it excludes or varies statutory interest, including by “specifying a rate of interest different from that given by section 4” (new section 6A; clause 11).
• Keep other remedies open. Subject to that rule, the parties would stay “free to agree contract terms which deal with the consequences of late payment of the debt” (new section 6A(3)).
• Cap payment terms. The cap would be 30 days for a public authority buyer and 60 days otherwise, but not for advance or construction payments. Regulations could exempt some written contracts, such as one where the buyer is smaller than the supplier (new sections 2B and 2E).

On 10 October 2026 we found no interest-rate figure in the Bill. The proposed 8% comes from the government’s response “Time to pay up” (March 2026), which proposes mandatory statutory interest “at 8% above the Bank of England base rate”.

The response proposes capping payment terms “starting with 60 days, no earlier than 2027”, and says late payment is devolved in Scotland and Wales and transferred in Northern Ireland.

What does the law ask before you sue?

A court “will expect” the parties to have followed a pre-action protocol or the Practice Direction on Pre-Action Conduct (paragraph 13). Our reading, an inference, is that both govern claims in England and Wales, as gov.uk says Scotland and Northern Ireland have their own court processes.

The Pre-Action Protocol for Debt Claims applies when a business claims a debt from an individual, including a sole trader; it does not apply to other business-to-business debts (paragraph 1.1). Under it, the creditor “should send a Letter of Claim to the debtor before proceedings are started”, by post, giving the amount and “whether interest or other charges are continuing” (paragraphs 3.1 and 3.3).

If the debtor does not reply within 30 days of the date on the letter, the creditor may start proceedings, subject to any remaining obligations to the debtor (paragraph 3.4). A debtor seeking debt advice must be allowed “a reasonable period” (paragraph 4.2). For other business-to-business debts, the Practice Direction asks for a letter and a reply within “14 days in a straightforward case” (paragraphs 2 and 6).

Time limits

In England and Wales a claim on a simple contract “shall not be brought after the expiration of six years” from when the cause of action accrued (Limitation Act 1980, section 5). Northern Ireland has the same six years (Limitation (Northern Ireland) Order 1989, article 4).

In Scotland an obligation in Schedule 1 of the Prescription and Limitation (Scotland) Act 1973 “shall be extinguished” after five years without a relevant claim or acknowledgement (section 6(1)). The Schedule covers periodical payments “in respect of the occupancy or use of land” (paragraph 1(a)(vi)).

Our reading, an inference: unpaid storage fees there likely fall within it, ending the debt itself, not only the claim.

How the law treats chasing

Chasing a consumer for payment is a commercial practice under the Digital Markets, Competition and Consumers Act 2024 (the DMCC Act), as section 225(5) covers acts after the supply. So its ban on unfair commercial practices in section 225(1) applies.

The CMA’s guidance on it (CMA207, 18 November 2025) counts “debt collection and payment demands” as part of the product (paragraph 2.7), but says unfair collection “does not of itself enable consumers to refuse to pay legitimate debts” (footnote 28). The ban has applied since 6 April 2025 (S.I. 2025/272, regulation 2) and extends across the UK (section 338).

A practice is aggressive if it uses “harassment, coercion or undue influence” (section 228(1)), judged by factors including timing and location and “a threat to take action which cannot legally be taken” (section 228(2)). Making “persistent and unwanted solicitations by any means, other than by attending at the consumer’s home” is banned “except in circumstances and to the extent justified to enforce a contractual obligation” (Schedule 20, paragraph 28).

Harassment of a debtor

In England and Wales it is an offence to harass a debtor with demands “calculated to subject him or members of his family or household to alarm, distress or humiliation” (Administration of Justice Act 1970, section 40(1)). The offence excludes steps to secure payment that are reasonable and otherwise lawful (section 40(3)) and conduct towards a consumer that the DMCC Act covers (section 40(3A)).

Our reading, an inference: section 40 still covers chasing a business customer. We did not check Scotland or Northern Ireland.

Breathing Space, England and Wales only

Breathing Space, the Debt Respite Scheme, covers debtors domiciled or ordinarily resident in England and Wales (S.I. 2020/1311, regulation 1). The Insolvency Service’s creditor guidance, updated 9 June 2023, says a standard breathing space gives “legal protections from creditor action for up to 60 days”.

During it the creditor must stop the debtor having to pay certain interest, fees, penalties or charges, stop enforcement or recovery action, and stop asking for repayment unless a court gives permission. Enforcement includes, subject to regulation 12(4)(d), selling the debtor’s goods (regulation 7(7)(e), as made), and interest and charges that accrued during it cannot be required afterwards (regulation 7(10)).

Our reading, an inference that needs a solicitor: while a customer’s storage debt is in a breathing space, the operator may not require late fees or interest accruing during it, chase the debt or sell the goods. We did not check whether licence fee arrears qualify.

What this guide does not cover

It does not cover deposits or these areas:

• Selling a customer’s goods. A separate, specialist area. CMA37 says terms letting goods be sold immediately or without adequate notice are unlikely to be fair (paragraph 6.71); the statute on uncollected goods “does not apply to Scotland” (footnote 263).
• Overlocking. Barring a customer’s access to a unit until they pay is a separate practice; see our entry on overlocking.
• VAT. Our guide to VAT on self storage sets out why storage is standard-rated and when a business has to register.
• Taking payments. Our guide to taking payments for self storage covers collecting licence fees by Direct Debit and card.
• Cancelling a booking. Our guide to the 14-day right to cancel covers whether, and how, that right applies to storage booked online.
• Consumer credit. On 10 October 2026 we found no official source that says whether a payment plan for arrears is “credit” under the Consumer Credit Act 1974.
• Other laws. We did not open the Unfair Contract Terms Act 1977, the Financial Conduct Authority’s rules or the Equality Act 2010.

How StoreBay fits today

StoreBay sends reminders and adds a late fee under a policy you can change. This section describes the software, not the law, and answers none of the questions above. By default, a failed payment is followed by reminder emails on days 2, 5, 8 and 14, and a £15 late fee, including VAT, on day 8.

You can change the days and the fee, remove a reminder or switch the fee off. The automatic fee is added at most once per case. These are defaults, and this guide takes no view on whether any fee or amount is fair.

A customer who pays another way gets one reminder email if an invoice is still unpaid 30 days after it is due. StoreBay does not add interest to overdue invoices, and its billing, reminders and late fees treat business and consumer customers the same way.

Our billing page describes how StoreBay collects by Direct Debit or saved card, tries a declined card again and emails reminders on a schedule you set.

Our self storage software page sets out what StoreBay does for an operator and what to look for in any such software.

Questions to put to your adviser

Put these to a solicitor:

• Is each customer a consumer or a business, and how would you show it?
• Is a storage licence a “contract for the supply of goods or services” under the 1998 Act?
• Is your late fee an estimate of loss, a deterrent or something else, and does your licence show it clearly and upfront?
• Do you charge interest and, if so, at what rate and from which day, including on a fee paid monthly in advance?
• Which of your business terms would the Commercial Payments Bill change if it came into force?
• What do you send before a claim, what do you do when a customer enters a breathing space, and is a payment plan for arrears “credit”?

Sources

All read on 10 October 2026.

• Late Payment of Commercial Debts (Interest) Act 1998, on statutory interest.
• The rate orders S.I. 2002/1675 and S.S.I. 2002/336.
• legislation.gov.uk’s title search for rate orders.
• The Bank of England’s Bank Rate history and Bank Rate page.
• gov.uk’s late commercial payments guide, updated 10 August 2016.
• gov.uk’s court claim guide, on court processes.
• Consumer Rights Act 2015, sections 2 and 62 to 64, and Schedule 2.
• The CMA’s unfair contract terms guidance (CMA37), 22 July 2026.
• The Supreme Court’s judgment of 4 November 2015 in Makdessi and ParkingEye.
• Searches of Find Case Law and BAILII.
• The Commercial Payments Bill, its stages and its text as amended on Report.
• The government’s response Time to pay up, March 2026.
• The Pre-Action Protocol for Debt Claims.
• The Practice Direction on Pre-Action Conduct, updated 6 April 2022.
• Limitation Act 1980, section 5 and Limitation (Northern Ireland) Order 1989, article 4.
• Prescription and Limitation (Scotland) Act 1973, section 6 and Schedule 1.
• DMCC Act 2024, section 225, with section 228 and Schedule 20 (in force under S.I. 2025/272) and section 338 on extent.
• The CMA’s unfair commercial practices guidance (CMA207).
• Administration of Justice Act 1970, section 40.
• The Insolvency Service’s Breathing Space guidance for creditors.
• S.I. 2020/1311, regulations 1 and 7, as made.
• Consumer Credit Act 1974, section 9.