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.