Top tips for taking in a lodger
Taking in a lodger has never been more popular. With household bills putting pressure on budgets, taking in a lodger can be a useful way to earn extra income from a spare room.
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 someone who rents a room in a property that is also the landlord’s home. The arrangement may include shared use of a kitchen, bathroom or living room, and may include additional services such as meals or laundry.
Taking on a lodger has become a very popular way to earn extra money. According to data from flatshare platform SpareRoom, rooms offered by live-in homeowners represent a massive portion of the rental ecosystem, accounting for 24% to 34% of the total UK flatshare market supply.
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 £3,750.
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?
Where the resident landlord shares living accommodation, such as a kitchen or bathroom, with the lodger, reasonable notice is generally sufficient. A court order is not usually required.
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 may 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 lodger agreement?
As a lodger is strictly speaking not a tenant, you do not need to draw up 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 clearly drafted 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?
If you take a deposit from a lodger, you should set out the amount, the circumstances in which deductions may be made and the arrangements for returning it in your written lodger agreement.
In England, deposits taken from lodgers are generally not subject to the statutory tenancy deposit protection requirements that apply to certain other residential tenancies. Keeping a receipt and a detailed property inventory can help prevent disputes over deductions.
Solicitor-approved lodger agreement and property inventory templates are available through Lawpack.
Other information