Taking in a lodger

It is becoming more popular to rent out spare rooms as a great way to raise extra cash.
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There a number of practical points which you must look at before you decide to let out a spare room at your property:

  • mortgage: check with any mortgage lender that you can take in lodgers;
  • tenant: if you are a tenant check that your lease allows you take in lodgers;
  • insurance: speak to your insurance company you may get the lodger’s possessions covered under your contents insurance; if not the lodger must have their own insurance;
  • benefits: if you claim benefits speak to your benefits agency as taking in a lodger is likely to affect any benefits you are claiming.

It is best to have a written agreement setting out exactly what you expect from the lodger, how much rent they must pay and areas of the house which they can and cannot use. Rocket Lawyer’s Lodger agreement contains the advice you need to get started and the help for you to complete the document.

If the room is being let furnished you should also prepare a list of the items in the room (an inventory). This is the best way to set out the condition of items when the lodger moves in and should avoid any dispute when the lodger moves out as to what damage has been caused to items during their time at the property.

Make the inventory as detailed as possible and include all the items in the lodger’s room and state their condition. Make sure you include the condition of carpets, curtains, doors, windows and light fittings.

If you are taking a deposit from a lodger this does not need to be protected in the tenancy deposit scheme but it is good to put in a separate account. Speak to your bank about opening an appropriate ‘lodger deposit’ account.

From 6 April 2016, you can earn £7,500 per year (£625 per month) tax-free from letting out a furnished room to a lodger. This is halved if you share the income with your partner or someone else. You will need to opt into the government’s ‘Rent a Room’ scheme otherwise you could pay tax on the rent you receive. Once in the scheme you will only pay tax on rent over the £7500. See the government website for more details.

Once you are ready to take in a lodger you will need to advertise the room; remember it is not just the lodger’s room you are letting but also the whole property that they can use. Make the most of what you are offering: free wi-fi and a garden are all good letting features!

There are many online advertisement sites to help you let your room and which allow you to upload pictures and full descriptions on what you are offering.

Once you have found a lodger you may want to use a credit checking service to verify the lodger and take up references on the prospective lodger before moving on to signing Rocket Lawyer’s Lodger agreement

If you are a landlord in England and Wales, you must check the lodger’s immigration status to make sure they have the right to rent. In Scotland, however, there is currently no legal requirement to check a lodger’s right to rent.

Remember, if you are thinking about letting a family member stay at the property, this does not constitute a lodger arrangement, but rather, an informal family arrangement. It is often assumed in these cases that there is no intention to create legal relations, unless the family member pays rent (in which case, they’d be a tenant as opposed to a lodger).

Where there are problems with a lodger (eg they are not paying their rent) and you seek to evict them, check the Lodger agreement for the correct procedure to follow. If there is no written agreement in place, then you need to give your lodger 'reasonable notice'. This doesn't need to be the 28 days which is standard for many tenancy agreements but should give them a chance to find alternative accommodation.

In many cases, tenants need their landlord's permission before they can take in a lodger. Your tenancy agreement may contain a term on this, so you should check it first. It may allow you to have a lodger, allow it on certain conditions, or forbid it completely.

If you do need permission, it's best to get this in writing.

As lodgers are 'excluded occupiers', they have less rights than a tenant. An excluded occupier means that you don't need to give the lodger a form or eviction notice to get them to leave.

The landlord should give the lodger 'reasonable' notice to leave. Notice can be given verbally; it doesn't need to be in writing. The lodger must leave when the notice period ends. For example, if you give a verbal notice to the lodger to leave in 2 weeks time, then they must leave in 2 weeks time.

If there is a written agreement (such as a Lodger agreement) it should say how much notice you need to give. If there is no lodger agreement, then you should give 'reasonable notice'. This can depend on how often the rent is paid. You don't have to give the lodger notice in writing unless the agreement says you should.

Notice is not required if the landlord and lodger both agree to end the lodging arrangement. The process is relatively straightforward and the landlord doesn't need to serve any eviction notices or forms. If both parties agree, you can simply record this in a document stating that the lodger has agreed to leave.

If you are a homeowner in Scotland, you must give your lodger notice to quit at least four weeks before you want them to leave. The lodger must leave when the notice period ends.

Make your Lodger agreement
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