Legal Definitions - in arrears

In arrears describes two distinct situations:

• First, it means that a payment or obligation is overdue or has not been fulfilled by its due date. Someone who is in arrears has fallen behind on a required duty, typically a financial one.

• Second, it can describe a payment schedule where compensation is provided after a service has been rendered or a period has concluded, rather than in advance.

Here are some examples to illustrate these meanings:

• A homeowner who consistently misses their monthly mortgage payments would be considered in arrears on their loan. This means they are behind on their financial obligation to the lender, and the overdue payments are accumulating.

  This example demonstrates the first meaning, where a financial obligation (mortgage payment) has not been met by its due date, resulting in an overdue balance.

• Many employees are paid their salaries in arrears. For instance, an employee might receive a paycheck on the 15th of the month for all the work they performed during the first two weeks of that month.

  This example illustrates the second meaning, where payment for services rendered (the work performed) is made at the end of the pay period, after the work has already been completed, rather than at the beginning.

• A landlord might structure a lease agreement so that utility charges for water and electricity are billed in arrears. This means the tenant pays for the exact amount of water and electricity they consumed during the previous month, with the bill arriving after the usage period has ended.

  This example also demonstrates the second meaning, showing a payment structure where the service (utility consumption) occurs first, and the corresponding payment is due afterward, based on the actual usage during the preceding period.