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.
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.
The UK government allows you to receive up to £4,250 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 £2,125.
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.
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.
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 tenant.
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.
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.
Making use of a property inventory template can also provide clarity if the lodger causes any damage.
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, such as SpareRoom.co.uk, 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.
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.
Published on: August 10, 2011