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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Can you take in a lodger?

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.

How do you get started?

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 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 a good to put in a separate account. Speak to your bank about opening an appropriate ‘lodger deposit’ account.

Rent a room scheme

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.

Finding a lodger

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

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).

Problems with lodgers

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.

Get started

Create your Lodger agreement

Answer a few questions. We'll take care of the rest