Category: Landlord and tenant articles

Top tips on how to boost your income without incurring any extra costs

With the economy struggling and unemployment rising, finding ways to make money has never been more important to the thousands of homeowners with mortgage payments to make each month.

But there are ways for you to make money without even leaving your home.

Rent a room to a lodger

Under the government’s rent-a-room scheme, you can earn up to £7,500 (2020/21 figure) a year tax-free if you get a lodger, as long as you provide them with a furnished room.

However, if you do not want a long-term lodger, consider a short-term homestay instead. Language schools, for example, are often looking for places for exchange students to reside.

Use Lawpack’s Lodger Agreement to get everything in writing

Rent out your drive or parking space

A Parking Space Let Agreement could be a great money-spinning tool. Renting out space on your driveway is a great way to make use of the extra space.

Rent out your garage

Research consistently shows that most people do not use their garage for housing a vehicle. Instead, homeowners use their garage as a dumping ground for junk. Clear out this rubbish, get a Garage Let Agreement and find someone who needs the space.

Related articles

• Lodgers: useful tips for beginner landlords
• Top tips for taking in a lodger
• How to rent out a parking space
• How to rent our your garage

 

Taking in a lodger has never been more popular. At the moment with soaring bills, renting our your spare room can be a easy and quick way of earning extra cash.

Read our top tips on what you need to think about when letting out a room in your home.

What is a lodger? 

Simply put: a lodger is anyone who pays to use a room in your house without having exclusive access to any other part of the property. Agreements with lodgers can take on many forms, from a straightforward agreement to use a bedroom through to deals including laundry service and meals.

Taking on a lodger has become a very popular way to earn extra money, with home entrepreneurs netting £3.9 billion per year in rental payments, according to Santander.

Whatever deal is reached, it is highly recommended to take out a lodger agreement – with Lawpack’s Lodger Agreement template available to buy and download.

Do I have to declare any payments?

The UK government allows you to receive up to £7,500 a year tax-free for letting out furnished room in your home. This is known as the Rent a Room scheme.

If you share a house and both of you rent out a room, or rooms, then the maximum amount drops to £3,250.

Under the rules a lodger can rent anything from a single room to an entire floor in your family home. However, this will not apply if you separate areas into different flats. Nor does it apply for unfurnished rooms.

If you exceed the maximum amount or rent out an unfurnished room you must declare the payments as income to HM Revenue & Customs and pay tax in the normal way.

Can anyone take in a lodger?

Theoretically anyone can take in a lodger, even if you are renting your home, and still benefit from the Rent a Room scheme.

However, your mortgage lender or the property landlord may prohibit the practice depending on your agreement with them.

Furthermore, it is always a good idea to check with your home insurance provider to ensure that it is on board with your decision to take in a lodger.

You can ensure that lodgers agree to terms and conditions favourable to insurers and mortgage providers by making use of a lodger agreement template.

How do you evict a lodger?

Evicting a lodger or a tenant can be a tricky situation. It is generally considered difficult and you have to provide a reasonable amount of notice. Under UK law, lodgers do not have the same rights as a tenant would have.

This means that once you have given reasonable notice that a lodger must leave they have no right to stay in your home.

Lawpack’s solicitor-approved Notice to Terminate a Lodger Agreement can be used to give notice to your lodger.

However, should a lodger refuse to leave you will need a court order if you want to evict them.

This emphasises the importance of drawing up a lodger agreement that both parties agree to before the lodger moves in.

A contract will help smooth any legal hurdles required to evict a lodger.

Do I need to make a tenancy agreement?

As a lodger is strictly speaking not a tenant you do not need to develop a tenancy agreement, however, writing up a lodger agreement is necessary.

This will help to avoid any future problems by clearly setting out both your and your lodger’s requirements and boundaries.

Furthermore, a fairly written agreement, using an approved lodger agreement template, will help facilitate any legal challenges that may occur if the relationship sours.

How do you find a lodger?

Given how difficult it can be to evict a lodger, choosing the right person to share your home is vitally important.

There are a number of websites which allow you to draw up an advert and read profiles of prospective lodgers.

Universities often provide a list of available rooms to their students. By contacting local institutions you could have your property listed.

Do the new tenancy deposit laws apply to taking in lodgers?

Current laws only apply for assured shorthold tenancies. However, taking a deposit to protect against property damage and the lodger failing to pay rent is highly recommended.

If you plan to take a deposit, it is vital that the terms are stipulated in a lodger agreement and that a property inventory template is filled out.

Solicitor-approved lodger agreement and property inventory templates are available through Lawpack.

Other information

• Seven steps to screening and selecting your lodger
• Rent a Room scheme: how to earn £7,500 tax-free
• Lodgers: useful tips for beginner landlords

What is the Rent a Room scheme?

If you have a spare room in your house, you could be sitting on a tax-free nest egg. Many more people each year are making a Lodger Agreement and taking in a lodger. And they can earn up to £7,500 a year tax-free income (or £3,250 if you’re letting jointly). This is known as the Rent a Room scheme. Find out more about the Rent a Room scheme…

The Rent a Room scheme is a tax-break. A tax-break for renting a room. It means that you don’t have to pay tax on any income that you get from renting a room in your house. It’s referred to, officially, as an ‘optional exemption scheme for income from renting furnished accommodation in your only (or main) home. To you and I it’s an easy way to earn some extra cash by taking in a lodger.

Who can benefit from the Rent a Room scheme?

You can benefit from the Rent a Room scheme if you let furnished accommodation in your only or family home to a lodger.

• Your only or family home is defined as the one where you/your family live for most of the time.
• A lodger is defined as someone who pays to live in your home, sometimes with meals provided, and who often shares the family rooms.
• A lodger can occupy a single room or an entire floor of your home.
• However, the Rent a Room scheme does not apply if your home has been converted into separate flats that you rent out. This makes it an for which there are different rules. If this is the case, you will need to declare your rental income to HM Revenue & Customs (HMRC) and pay tax through Self-Assessment.
• Note that the Rent a Room scheme specifically covers furnished rentals. The Rent a Room scheme doesn’t cover unfurnished lodger rentals.

If you share a home and both want to rent a room, you still can do so under the Rent a Room scheme.

If you are both renting furnished accommodation in your joint home, you will each be entitled to receive half of the allowance (i.e. up to £3,250 for the 2020/21 tax year) without paying tax.

If you provide meals and laundry services, you can still benefit from the Rent a Room scheme.

If you charge for additional services, you will need to add the payments you receive to the rent, to work out the total receipts. These are calculated as income that counts toward your £7,500 tax-free limit. If you get more than £7,500 a year in total, you will have to pay tax by completing a Self-Assessment Tax Return, even if the rent is less than that.

If you run a business, you can benefit from the Rent a Room scheme.

If you run a B&B or a guest house, or if you provide meals or cleaning services as part of your rentals, you can still join the Rent a Room scheme. You simply need to complete the relevant parts of the self-employment pages of your Self Assessment tax return.

Even if you don’t own your own home, you can benefit from the Rent a Room scheme!

You can benefit from the Rent a Room scheme whether you are a home owner or you are renting your home. However, if you are renting, you will need to check that your lease allows you to take in a lodger.

Is the Rent a Room scheme for you?

You should always check with your current mortgage provider and insurance provider before you rent a room and start making that Lodger Agreement. Make sure that your current arrangements are OK, and remember that they are not set in stone. You can change them (or your provider) if you want to!

On the face of it, everyone wants tax-free income. So who wouldn’t opt in to the scheme? But, as with all tax-breaks, there are pros and cons. And there are some simple sums you can do now to find out what is right for you.

If you are in the Rent a Room scheme, you can’t claim any expenses relating to your lodger letting. These may be things like repairs to the property, wear and tear, insurance, heating and lighting, etc.

To work out whether you will be better off joining the Rent a Room scheme or declaring all of your rental income and claiming expenses on your tax return, you need to compare:

1. How much rental income you are left with after your expenses (your profit) with…
2. The amount of your receipts (rent plus any income from laundry services, meals, etc.) over £7,500 or £3,250 if you’re letting jointly (2020/21 tax year)

By not joining the scheme, you will be paying income tax on 1. If you join the scheme, you will pay tax on 2. The figures will either add up or not!

How to join the Rent a Room scheme

If you don’t normally receive a tax return and your receipts are below the tax-free thresholds for the scheme, the tax exemption is automatic so you don’t need to do anything. There is no need to tell anyone unless you go over the magic £7,500 figure (or £3,250 if you’re letting jointly).

But if you wish to join the scheme and your receipts are above the tax-free threshold, you must tell HMRC – you can do this by filling in Self-Assessment tax return and claiming the allowance.

Further information

• Seven steps to screening and selecting your lodger
• Lodgers: useful tips for beginner landlords
• Top tips for taking in a lodger

More and more homeowners are finding it difficult to make ends meet. Recent research suggests that a third of mortgage owners are struggling to keep up with repayments and one in eight are considering taking in a lodger to help with costs.

Here are tips for what a landlord should think about before they rent a room.

1. Am I allowed to have lodgers in my property?

Check with your mortgage company whether you’re allowed to rent a room. Most mortgage companies and landlords will agree if you ask them first, provided that you carry out proper checks.

2. How do I go about finding a lodger?

Students are often a good choice, and you can usually advertise via the students’ union of your local college. If you work for a large firm, have a word with the HR department as they may know of someone. Try putting a card in the window of your local corner shop. Finally, there are a number of websites which advertise rooms for lodgers.

3. Should I check the lodger out first?

Your lodger will have access to your home and all your personal belongings so be very careful who you choose. Make sure that it’s someone who you can trust, and who you will get on with. After all, you’ll be sharing a kitchen and bathroom with them! Take references – the main types of references are employer’s, bank, previous landlords’ and character references – and do a tenant credit check using a credit reference agency.

4. Are there any regulations I should be following?

Although you don’t have to comply with all the legal repairing obligations applicable to rented properties, furniture should comply with the furniture regulations, and any gas appliances should be checked annually by a Gas Safe registered gas installer. For more information, speak to your local Trading Standards Office (furniture) or local Health & Safety Executive office (gas regulations).

5. Should I make a tenancy agreement?

Once you have your lodger, you need to reach agreement with them about the rent and any ‘house rules’. It’s not absolutely necessary to give a written agreement, but it’s generally a good idea.

Make a tenancy agreement now with Lawpack’s Lodger Agreement download.

Note that an assured shorthold tenancy agreement won’t be appropriate.

6. What if I want to get rid of my lodger?

If your lodger is unsatisfactory, you don’t need to get a formal court order as they’re sharing your home, but you do need to give them written notice (Lawpack’s Notice to Terminate a Lodger Agreement can help).

28 days is the normal notice period, unless they have behaved very badly in which case a shorter period may be appropriate.

7. What are the tax implications?

The government has a ‘rent a room’ scheme which provides that the first £7,500 will be tax free (2020/21 figure), but you have to disclose this income on your tax return. If you’re on benefit, you’ll also need to speak to your benefit office, as it will affect your entitlement.

If you happen to have three or more lodgers, you’ll probably be viewed as running a House in Multiple Occupation and you may have to obtain a license from your local authority.

Other information

• How to check and ‘screen’ your lodger
• Rent a Room scheme: get a lodger and earn £7,500 tax-free

Disagreements between landlords and tenants are relatively common, with more than one in five property owners admitting that they have had a dispute with someone staying in one of their homes.

Research by AA Home Membership found that 22 per cent of landlords have clashed with a tenant over a particular issue.

More than half of the cases involved damage to the property, with this being named as by far the most common cause of problems between the two parties. Landlords are advised to create a property inventory at the start of the tenancy in order to protect the property and get everything in writing.

However, it wasn’t the only reason that got landlords and tenants at each others’ throats, with four out of ten property owners saying that the disagreements they have had were caused by dwellers failing to clean the home to a satisfactory standard when they moved out.

What’s more, a third were the result of poor garden maintenance, which can be a major concern among many landlords.

Of course, there is no end to the range of issues that have come between landlords and tenants over the years, and some even said that the theft of a boiler and leaving underwear in the fridge were among the more unusual reasons for disputes.

Almost half of the landlords surveyed said that they think that it’s extremely important to maintain a good relationship with their tenants at all times. Primarily, the major incentive for doing this is that it makes them less likely to move.

However, there are plenty of issues that can crop up that make a good relationship a thing of the past.

Some 44 per cent of landlords said that they had been involved in a spat over unpaid rent, while 21 per cent suggested that the neighbours complaining about a tenant’s behaviour had been the root of a problem.

14 per cent also told how tenants keeping pets had led to a disagreement.

 

Other information

• Landlords: how to make a rental inventory
• Why you need a rental inventory
• How to avoid tenant disputes over cleaning

You’ve found your tenants. Now you need to prepare the property for the tenants’ arrival and check them into the property.

Here are our top tips on what you need to think about when letting out your property to new tenants.

• 1. Meet your tenants and set up a rapport with them
  Get to know your tenants and form a working relationship with them. This will help you to communicate better during the tenancy and to hopefully avoid disputes in the future.
• 2. Reference your tenants fully
  Arrange a detailed reference of your tenants to check out their credit history. It’s important to get employer, bank, previous landlords’ and character references. The employer’s reference is the most important as it gives some assurance that the tenant will be able to pay the rent.
• 3. Ask tenants to pay for referencing fees
  If the tenants suspect that they are going to fail the reference, they will pull out saving you time and money.
• 4. Arrange a standing order
  Use Lawpack’s standing order mandate template to ensure that your tenants pay their rent on time.
• 5. Make a detailed property inventory
  All landlords should create a property inventory, whether the property is furnished or not as it protects your property from damage. Also, under the Tenancy Deposit Scheme, owners wanting to claim money from their tenants’ deposits now have to prove that damage has been caused, so an inventory is vital.
• 6. Arrange the gas certificate for the property
  Before a property is let, and annually thereafter, all gas appliances must be checked by a Gas Safe-registered plumber. You must hand a copy of the gas certificate stating that a check has been made and detailing any work done to the tenant at the start of the tenancy and provide it to them annually thereafter (within 28 days of the annual check being completed).
• 7. Assess the property for fire safety
  To protect your investment, it’s advisable to check out your property for risk of fire. Make sure that there is adequate means of escape in case of an emergency. Fit smoke detectors and consider having a fire blanket and a small dry powder extinguisher in the kitchen.
• 8. Obtain an Energy Performance Certificate (EPC)
  By law you must obtain an Energy Performance Certificate, which rates the energy efficiency and environmental impact of the property, from an accredited energy assessor and provide a copy of it to the tenant at the start of the tenancy.
• 9. Register the deposit within 30 days
  A deposit is required for all assured shorthold tenancies. If you’re going to take a deposit which will be subject to the tenancy deposit statutory schemes, you need to have decided in advance which scheme you will be using. Within 30 days of taking the deposit from the tenant, you must also give them details of the tenancy deposit scheme being used.
• 10. Give your tenants a tenancy agreement
  All landlords should ensure that their tenants have signed a written tenancy agreement prior to going into possession, as informal oral arrangements can be a recipe for disaster. If you intend to take a damage deposit, then you will need to have a tenancy agreement. Use Lawpack’s DIY tenancy agreement.

Related articles

• Why you need a rental inventory
• How to vet your prospective tenants
• Why a written tenancy agreement is necessary
• Regulations you must know before letting property

Increasing numbers of landlords are facing properties that are dirty at the end of the tenancy and it has become the most common reason for disagreement when it comes to deposit disputes, according to the Association of Independent Inventory Clerks (AIIC).

Disputes over cleaning are arising because tenants are not leaving the property in the same state as when they rented it and are shocked to hear that they could pay anything from £15 to £25 per hour for professional cleaning.

The most common cleaning problems at check out are:

• Ovens
  If the oven was clean at check in, then the tenant is obliged to leave it in the same state at check out, with no burn marks. Professional oven cleaning can cost anything between £50 and £80.
• Marked and stained carpets
  Many tenants try to hide stains with furniture or rugs. Some even cut out the stain and replace it with another bit of carpet from another area in the property.
• Limescale, grease and dust
  Other cleaning issues include heavy limescale on bathroom and kitchen fittings, grease deposits in the kitchen and think dust and cobwebs throughout the property.
• Windows
  Windows that haven’t been cleaned throughout the whole term of the tenancy.

Problems such as knife marks on worktops and large chips on paintwork are viewed by tenants as normal ‘wear and tear’.

As a result, it’s extremely important for landlords to do a thorough check in and check out of their properties at the start and end of the tenancy agreement.

How landlords can avoid deposit disputes

• Prepare from the beginning of the tenancy
  Make sure that you have a clear, concise tenancy agreement. Conduct a thorough property inventory, check-in report and check-out report. Remember to take photographs and keep receipts and invoices.
• Make sure you have sufficient evidence
  When taking the dispute to the tenancy deposit scheme, make sure that you have evidence to support your claim that is robust and relevant, as the adjudicator will make the decision based solely on the evidence you submit.
• Allow for fair wear and tear
  The House of Lords defines fair wear and tear as ‘Reasonable use of the premises by the Tenant and the ordinary operation of natural forces’, which is a statement quite open to interpretation. Are replacements or repairs needed at the end of the tenancy? Light marks on the carpet may be viewed as unavoidable but if the tenant has spilled nail varnish on the carpet or burnt it with an iron, then the tenant could be liable for repair. When making a judgement, you must consider whether the item has been damaged or worn out through natural use versus sheer negligence.
• Speak to your tenants
  When checking out a tenant, it’s vital for landlords to inform the tenant of the areas that require cleaning and the potential costs involved. Talk through any issues with your tenants and explain their obligations as set out in the tenancy agreement and your reasons for making deductions from the deposit.

As wear and tear cannot be easily defined, it’s vital that landlords minimise the level of wear and tear in their properties and ensure that they have covered all bases in the unlikely event of a dispute with the tenant over the return of the deposit.

Related articles

• Tenancy deposit schemes: what you need to know
• How to make a property inventory

Most landlords will have expenses to pay on their properties, such as mortgage payments. Not only is it important that you find a tenant quickly, but also that they’re an honest person who will pay the rent promptly (so that you can meet your expenses) and who will look after your property (and protect your investment).

Finding a tenant

1. Consider using a reputable agency to find the tenant for you.

Many agencies provide a service where they find tenants for you. You can then deal with the management of the property once the tenant has been signed up. This can be a good idea, particularly if you’re a new and inexperienced landlord, as the agency will also advise you on the preparation and presentation of the property. Often quite small improvements can make a big difference. Also, agencies, because of their marketing experience, can usually find good tenants quicker than you would. Generally, they will also be responsible for referencing the tenants for you. However, if you do decide to use an agency, make sure that you read their terms and conditions very carefully. Many agencies have hidden charges, and some may claim a continuing agency fee every time the tenancy agreement is renewed.

Do note that even if you wish to find your tenant yourself, you may, if you’re a new landlord, want to consider taking some initial advice on the preparation and presentation of the property, and on a suitable level of rent.

2. Go it alone.

If you do decide to advertise for a tenant yourself, then consider the following marketing methods:

• The internet. There are many websites which will market the property for you, often for little or no cost.
• Local accreditation schemes. These are often run by local authorities in conjunction with local universities and colleges, and sometimes other organisations. You will have to sign up to a code of conduct and undertake training, but the scheme will often include the free marketing of properties. You can find out what schemes are available via www.anuk.org.uk.
• A local newsletter. Many local papers will have a special day in the week for rented property, and some may have a special weekly or monthly property supplement. Have a word with your local newspaper’s advertisement staff.
• A local shop window. Often sweet shops and post offices will allow you to put a postcard in their window for a modest charge.
• A local company notice board. This can be a useful way to find a tenant, particularly if the company has a lot of staff relocating to the area,
• A student accommodation office. This is very important if you’re looking to let to students, but most offices demand very high standards for the properties on their lists.

Checking out your tenant

Once you have found your tenant you should take details from them, ideally using a form or checklist, such as the Lawpack’s Landlord’s Tenancy Application Form. It’s particularly important that you have full details of their employment history because if they have had frequent job changes in the past, they’re not likely to stay in the property for a great length of time.

You should then take up references, which should include an employer’s, bank, previous landlords’ and character reference. The employer’s reference is the most important as it gives some assurance that the tenant will be able to pay the rent. Remember that the applicant’s current landlord’s reference may not tell you the whole story as the landlord may be anxious to get rid of the tenant.

Using an online tenant checking service can be very useful; for example, they will pick up if the tenant has County Court Judgments (CCJs) against them. Alternatively, your local landlords’ association (if you’re a member) or your insurers may be able to recommend a good firm.

But many experienced landlords consider that the best way to assess a tenant is through their own knowledge of human nature and ‘gut feeling’. If you feel uneasy about a prospective tenant, think very carefully before allowing them into your property. It may be difficult and expensive to get them out again!

For more expert guidance on how to prepare a property, find a tenant, create a tenancy agreement, deal with deposits, and, ultimately, how to evict a tenant, read Lawpack’s, The Complete Guide to Residential Letting.

There are many things you need to think about when you’re starting to let out your property to tenants. The first thing you need to do is advertise the property effectively and get the right tenant for you.

Read our top tips on what you should think about when advertising your rental property online. Find out how you can present the property in the best light and make your advert stand out.

• 1. Find a good property website
  There are many commercial websites which advertise properties to rent, sometimes for no charge. Landlords’ associations also have a website where landlords can advertise.
• 2. Professionally photograph your rental property
  Professional photographs help to present your property in the best light. Make sure that you include interior shots of your property and that you publish more than 8 photographs.
• 3. Tailor your advert to the tenants you are looking for and tailor the advert accordingly
  Different types of tenant will be attracted to different types of property, so you should research into the market and decide what sector you will aim at (e.g. students, contract staff). Ideally, you should be looking for a tenant with a permanent job who will want to stay there for a long time, as long-term lets reduce the costs of letting and periods of time when the property is empty.
• 4. Add a floor plan
  Floor plans can increase viewings by 50% and prevent tenants wasting your time when viewing.
• 5. List your property’s key features
  Outline everything good about your property in your advert; for example, central heating, dishwasher, etc.
• 6. Give details about facilities and amenities in the local area
  Emphasise the proximity of your property to transport links and local amenities.
• 7. Become an accredited landlord
  This proves to prospective tenants that you take your role as landlord seriously. Emphasise your accreditation in the advert.
• 8. Don’t set your rent too high
  Setting your rent too high could mean that your property will not be let for weeks.
• 9. Don’t set your rent too low
  Setting the rent too low will mean that you will have plenty of tenant enquiries, but you will not be maximising your yield.

 

Related articles

• Top tips on preparing your property for tenants
• 7 common mistakes novice landlords should avoid

With so many favourable articles of late proclaiming the positive merits of investing in buy to let properties, a novice landlord might be forgiven for thinking that owning a rental property is an easy way to make cash.

But the reality is somewhat different. The potential for earning a healthy profit is almost certainly there, but there are also many pitfalls on the road to becoming a successful landlord. So before you acquire a massive headache, learn how to avoid common landlord mistakes:

Mistake #1: Get a letting agent

If you know nothing about letting property, consider paying a professional letting agency to manage your property. The fees will bite into your profit margin but in the event of any problems, they are first in the firing line.

Mistake #2: Don’t rush into choosing a tenant

Never make the mistake of assuming a bad tenant is better than no tenant. An empty property might be highly undesirable, especially if rental payments are required to cover a mortgage, but a bad tenant could end up costing you thousands in damages, plus they may run up huge rent arrears and then abscond.

Mistake #3: Vet your tenant

On a similar note, ALWAYS check references thoroughly. Just because a tenant appears to be nice and respectable, it does not automatically mean they ARE nice and respectable!

• How to find and check out your new tenants

Mistake #4: Get permission from your lender

If your property is subject to a mortgage, ensure the lender is aware you are letting it. This is a common mistake people make when letting their home for periods of time. A failure to do so could invalidate any insurance policy you have on the property.

• Regulations you must know before letting property

Mistake #5: Get landlord insurance

Do not be tempted to cut corners on landlord insurance. A good policy might prove to be essential if you fall victim to #2 on our list.

Mistake #6: Get a deposit

Always ask for a decent deposit to cover the cost of potential damage to the property. Eexpensive cleaning and repair bills at the end of a tenancy are a big problem for many landlords.

• Tenancy deposit schemes: what landlords need to know

Mistake #7: Draw up a clear tenancy agreement

Overdue rent is a very common issue faced by landlords, so make sure you have a clear tenancy agreement drawn up with the rent due date highlighted to avoid confusion. If a rent payment is late, take immediate action to resolve the problem.

• Which tenancy agreement do I need?

Other information

Lawpack publishes a range of bestselling Tenancy Agreements