What is a lodger?
Technically, a lodger is different to a tenant. A lodger is someone who rents a room in someone else’s home, usually sharing living spaces such as the kitchen and bathroom. By contrast, tenants generally rent the whole property.
Unlike a tenant, a lodger does not have exclusive rights to any part of the property – meaning you, as the landlord, can access their room (however, you should respect their privacy).
Matt Hutchinson, a director at the flatshare website SpareRoom, says tenants generally have more rights than lodgers because the law recognises that homeowners and landlords are distinct roles, and sharing a home “requires a different set of rules”.
He adds: “Homeowners who rent out (always furnished) rooms to lodgers do so under a licence rather than a tenancy agreement, which sets out the conditions of their stay in your property.
“For example, you’re only required to serve ‘reasonable’ notice if you want your lodger to move out. That’s usually the length of the rental payment period, so typically one month, but it can be shorter. There’s also no minimum term required by either party.”
Live-in landlords can ask lodgers for a deposit. But unlike a residential landlord letting an entire property on an assured shorthold tenancy (AST), there is no obligation to protect the deposit using a deposit protection scheme.
Who can take in one?
Most homeowners can take in a lodger, but if you have a mortgage, it is best to speak to your lender first.
Mark Harris, the chief executive of the mortgage broker SPF Private Clients, says: “Even those lenders who don’t have an issue with lodgers may have certain caveats, such as a cap on the number of lodgers. Principality [building society] will only allow one, while Nationwide and Santander will allow up to two lodgers. Some lenders will forbid lodgers altogether.”
Bear in mind that if you let rooms to more than two people, your property may then be classed as a “house in multiple occupation” (HMO) by your local authority. There are extra safety requirements and standards for HMOs, and you will often need a licence.
If your home is leasehold, check the lease to see whether you need the freeholder’s permission to sublet part of the property. Council tenants can also sublet a room to a lodger, assuming the local authority gives the go-ahead. Private tenants can take someone in, too, as long as they have their landlord’s permission.
Find the right person
SpareRoom is the go-to site for lodgers and flatmates. As well as advertising your room, check the “room wanted” ads and sign up for alerts, so you will be aware of anyone looking in your area.
Other websites worth checking out include Roomies UK and Ideal Flatmate, while MondaytoFriday and GetDigs UK specialise in weekday lets.
Use word of mouth, too: ask friends, family or colleagues whether they know someone looking for a room. There is social media too: local Facebook groups are a good place to start.
Earn up to £7,500 tax-free
The government’s “rent a room” scheme lets you earn up to £7,500 a year (£625 a month) tax-free from letting out furnished accommodation in your home. The threshold is halved to £3,750 if you share the income with someone else. Most live-in landlords include bills in the rent.
To determine how much rent to charge, research local market rates for similar rooms and adjust based on your specific circumstances. Consider factors such as the size and condition of the room, shared living spaces and the location.
The income limit covers everything you charge your lodger – so if you charge them for cleaning, meals or laundry, you will need to count these fees or costs too.
You do not need to do anything unless you earn above the threshold – in which case you will need to pay income tax on the amount above £7,500.
“The tax-free threshold hasn’t been increased since 2016 and is no longer representative of average room rents today,” says Hutchinson. “This means many people who rent out rooms earn more than the threshold. If they do, they must opt into the scheme and complete a tax return to claim their tax-free allowance.”
Do your homework
When choosing someone to share your home with, it is important to check you are compatible.
A quick chat will help you decide if someone’s lifestyle and personality fit with yours. Ask about working hours (including whether they work from home), smoking, pets, regular guests, cleaning habits and expectations.
If you are in England, once you have found a potential lodger, you need to do a “right to rent” check to make sure they are legally allowed to live in the country. You can be fined or sent to prison for failing to carry out this check. To do this, you should ask to see relevant documents. There is an online guide that can help with this process.
You may also want to carry out credit checks and ask for references before signing an agreement.
Make an agreement
A “lodger agreement” – or “licence to occupy” – is used by live-in landlords to rent out a spare room in their home. This is a different type of contract to an AST, which is what you would use if you let the entire property to tenants.
You can include various terms in the lodger agreement, such as about rules on overnight guests and noise, cleaning responsibilities and use of common areas.
Having everything in writing at the beginning can avoid disputes later on.
The agreement should also set out the rent amount, payment frequency, how it should be paid (for example, by standing order) and any notice period required.
Consider your finances
If you are claiming benefits and take in a lodger, you must inform the Department for Work and Pensions at your local jobcentre immediately. Taking in a lodger can affect your benefit entitlements, and failing to report this change can lead to overpayments, penalties or even prosecution for fraud.
If you normally get the 25% single-person discount on your council tax, this will end when a lodger moves in. However, if the lodger is a full-time student, the discount may still apply.
Tell your home insurer
Make sure your tell your buildings and contents insurer about your lodger, as failing to do so can invalidate your policy. You may need a home insurance policy that includes cover for lodgers, or you may have to pay an extra premium on your current policy.
Your insurer may also add exclusions to your cover – such as theft if there is no forced entry.
You will need to check with your provider whether the policy will cover your lodger’s possessions, or if they need to take out their own contents policy.
Set up the room
If you use the “rent a room” scheme to earn tax-free income, you must provide your lodger with a furnished room. This means providing a bed and mattress, wardrobe or other storage, and a desk or table if there is space.
You will also need to ensure the room meets fire safety standards, such as having working smoke alarms, fire-safe furnishings and proper ventilation. You will need to comply with gas safety regulations, too. This means your gas appliances must be checked every year by a Gas Safe registered engineer.
On moving-in day
It’s helpful to be around when your lodger moves in – do not just hand over the keys and disappear. They could have questions, so being available makes settling in smoother. Of course, you do not need to hover while they unpack, but make sure they know where to find you if they need anything.