Tenancy Agreements 33 days of tips – Day 5 – shared houses

Many, maybe most, rented properties are let to people sharing property.  Families, couples, friends, even strangers sharing to save money.  If you are a landlord and have people sharing YOUR property – how best can you deal with this in your tenancy agreement?

There are basically three methods:

• You can get all the occupiers to sign the same tenancy agreement as ‘joint tenants’, or
• You can rent to one tenant at the full rent and allow them to take in lodgers, or
• You can let out the rooms on individual tenancy agreements with shared used of the common parts of the property

Which tenancy agreement type should YOU use?

Tenancy agreements with joint tenants

This is the most common arrangement. The tenants will all be ‘joint tenants’ all signing the same tenancy agreement and so will have what is called ‘joint and several liability’. This means that they are all liable both ‘jointly’ or together, and individually.

So if four tenants, Matthew, Mark, Luke and John all share a flat as joint tenants, if they fall into arrears of rent, then the landlord can sue all of them. Even though they may each have agreed to pay a quarter of the rent each, and it is just Luke who has not paid.

So far as the landlord is concerned, it does not matter who is responsible for the arrears. Legally they are *all* responsible, and he can claim the money from each or all of them. Collectively the tenants are ‘the tenant’, and are all in it together. This is why a landlord cannot evict just one of joint tenants (no matter how much his co-tenants would like this!) – he can only evict them all or none of them.

There are a number of advantages for landlords with the standard joint tenant agreement. The joint and several liability is a plus of course. Also, as the whole house is let, the landlord can require the tenants to have the utilities put in their own name, which will mean that he will not be responsible if they fail to pay.

Where the joint and several tenancy agreement falls down is when one of the joint tenants wants to leave and a new person has to be found to take his place. If you are in this position, my Dealing with Changing Tenants kit has guidance.

The joint and several tenancy agreement is best for couples and families (where both partners will sign the agreement), and groups of people sharing, who are friends and who expect to be living at the property for the same length of time. For example a group of students renting a house for an academic year.

They are less satisfactory where people are moving out and moving in at different times. Here you should use one of the other solutions.

A Tenancy Agreement for one tenant subletting to lodgers

Most landlords are dead set against allowing tenants to take in lodgers.  They worry about losing control and finding the property sublet to unsuitable people.

However, there are advantages to this method, particularly for the landlord who does not want the bother of managing lots of tenants.  However, it is essential that you have an absolutely trustworthy tenant.

Assuming this, advantages include:

• More flexibility in dealing with lodgers who don’t fit in – as lodgers are excluded occupiers under the Protection from Eviction Act, they can be evicted without having to get a court order
• The main tenant can take over the utility bills and recoup this from the lodgers
• The main tenant will be responsible for Right to Rent checks, not the landlord

If you are worried about unsuitable lodgers being chosen, you can always require that new lodgers get your approval first.

This sort of arrangement is perhaps most commonly used when parents buy a property for their children to live in at University, and allow them to take in lodgers to pay rent over to their parents.

You can use a standard AST with a side letter allowing a permitted number of lodgers.  Plus, maybe a requirement that you be consulted before they are accepted.

So far as the lodger agreements are concerned, my Your Law Store website sells a ‘new lodger’ pack which provides all the forms your tenant will need here.

A Tenancy Agreement for a room in a shared house

Here each tenant will have his own tenancy agreement, which will be for exclusive use of his own room (or rooms) and shared use of the rest of the property.

It means that there are no problems if one tenant has to move out before the others. The other tenants are unaffected (other than by the prospect of having a new person living in the house). However, this type of arrangement is less popular than the joint tenant arrangement. There are a number of disadvantages for the landlord, mainly that:

• they do not get the benefit of joint and several liability – when one of the tenants moved out there is no rent for that room until a new tenant is signed up, and

• it is highly unlikely that any of the tenants will want to take over responsibility for the utilities (as they will not have any control over who lives in the house) so the landlord will have to remain named on the accounts.

However, there are a few advantages, namely that

• the tenants will not be able to keep the landlord out of the common areas in the same way that they can if they are renting the whole property, and
• that the landlord may get more rent from letting individual rooms than from renting the property out as a whole.

Whichever option you choose however, it is important that you use the right type of tenancy agreement. A standard AST document is not suitable for letting out a room in a shared house, and specific tenancy agreements for these are less common. Although they are all available on the Landlord Law site!

Tenancy agreements and HMOs

Finally, note that whether or not a property is an HMO, does not depend on the type of tenancy agreement used.  A property is an HMO if it falls within the definition as set out in the Housing Act 2004.  So do not worry about using the ‘room in a shared house’ type agreement because you think that by using this you will be creating an HMO.  It shouldn’t make any difference.

Next time we will look at ‘right to rent’ issues.