Life is tough for many tenants nowadays. Rents are going up and salaries are not. It makes it very difficult to pay for everything – including the rent.
Which is why we read increasingly about tenants being evicted for rent arrears when they just can’t make ends meet.
If the rented property has a room which your tenants are not using – there is one possible solution. Renting it out to a lodger. However many landlords are hostile to this.
- They are concerned about the lodger being someone unsuitable who might cause problems
- They are worried about the right to rent rules
- They are worried about the extra wear and tear on the property
- They are worried about the lodger acquiring a tenancy
- They are worried about the implications under the HMO rules
- They are worried about insurance
- They are worried about the lodger being left in the property after the tenants vacate.
I’m going to take a look at all these issues below, but in most cases it goes back to your choice of tenant.
The importance of a good tenant
If you have a good tenant, they will be as keen as you are to have someone suitable in the property – which is after all their home. They will also respect any rules or conditions you impose.
If you have a bad tenant then there is not much you can do to stop them subletting the property other than through the ‘blunt instrument’ of eviction proceedings.
If you have taken care with your tenant and have chosen someone who is responsible then allowing them to grant a lodger license for their spare room should not, in most cases, be a problem.
Unsuitable lodgers
This can be resolved by granting permission on the basis that the prospective lodger is checked and referenced and that you be given sight of the reference material. You can also stipulate that the lodger must be someone you have approved.
Right to rent rules
As your tenant will be the lodger’s landlord, it will be up to the tenant to carry out the right to rent check. However, you need to warn them that they need to do this.
A suitable form to help them, our ‘right to rent checklist and record’ for lodger landlords can be purchased from my Your Law Store website.
Wear and Tear
This will probably be offset by the fact that your tenant will remain in the property for longer, and the prospect of having to evict for rent arrears will be avoided.
However, you can always grant permission on the basis that there is a small rent increase to take account of this. Don’t make this too much though as you risk your tenant refusing to sign and taking in a lodger anyway.
The lodger acquiring a tenancy
There is no way that the lodger can acquire a tenancy with you without your consent while your tenant is in occupation.
The lodger may in some circumstances obtain a tenancy from your tenant if they are given exclusive occupation of their room. However provided they share living accommodation with your tenant, this will not grant them security of tenure as they will be an ‘excluded occupier’ under the Protection from Eviction Act 1977.
Your permission to your tenant should, therefore, be conditional upon the tenant sharing living accommodation with the lodger, to ensure that they have the excluded occupier status.
HMO Implications
If the lodger is replacing one of joint tenants who wishes to move out, this should not affect the HMO situation as you will just be replacing one occupier with another.
If the tenant is a single person and is the only person living in the property – then there is no risk of creating an HMO.
Otherwise, an HMO may be created and you need to consider this before allowing it. The rule which allows you to take two lodgers without creating an HMO only applies to owner-occupiers.
However, an HMO situation is not inevitable. For example, if the lodger is a relative then they will be counted as part of the tenants ‘household’. Or the property may already be an HMO. This is the situation where more than two people who are not family are sharing the property.
Or the property may already be an HMO. This is the situation where more than two people who are not family are sharing the property. In this case, the situation will not change by allowing a lodger. However, if the HMO is a licensable HMO you need to make sure that you obtain a license as there are severe penalties for non-compliance.
If you are not sure what the HMO situation is, it is best to take advice before agreeing to a lodger.
Insurance
Many insurance policies will be invalidated if you allow a tenant to take in a lodger. However not all.
Some insurers will permit this – for example Alan Boswell, provide you notify them in advance, follow their guidance and ensure the lodger is given a proper agreement. You can contact them here.
Lodger remaining after the tenants move out
This can be a problem. However, it is less likely to be a problem if your permission is granted on the basis that your tenant will be liable to you for the costs of obtaining vacant possession if this happens. Make sure your tenant understands this from the start.
If the lodger proves difficult when asked to leave, there is guidance on my Lodger Landlord website (days 19 and 20).
The Landlord Law Service
In order to help my Landlord Law members whose tenants wish to rent a room to a lodger, I have now developed a new ‘permission for a lodger’ form which you can use if you decide to grant permission.
This sets out various terms and conditions for the tenant to comply with, which include all the points made above, and various others to protect your position as a landlord.
I have also provided a Lodger Form which you can require your lodger to use.
If you use these documents, this will minimise your risk.
Why landlords should allow tenants to grant lodger licenses
One reason why I have drafted up these form is that I think landlords should unless there is a legal reason (such as under the HMO rules) allow tenants to do this.
- It will benefit you as it will make it easier for your tenant to pay the rent
- If you do not agree, there is nothing to stop your tenant doing this anyway – all you can do, ultimately, to stop them is to evict them. Which you probably won’t want to do as it will inevitably result in lost rent and eviction costs
- If you agree then you will have some control over the process and can ensure that the lodger chosen is someone suitable
There is also the fact that we currently have a housing crisis, particularly in London and other large cities, and allowing tenants to take in lodger will go some way to help this.
NB Find out more about my Landlord Law Service.
As well as the lodger forms there is also a long Lodger article which explains the law.
“Life is tough for many tenants nowadays. Rents are going up and salaries are not. It makes it very difficult to pay for everything – including the rent.
Which is why we read increasingly about tenants being evicted for rent arrears when they just can’t make ends meet.”
That might be the spin put on it by the anti-landlord brigade but the reality is this;
https://www.lslps.co.uk/news-and-media/market-intelligence/buy-to-let-index/england-wales-buy-to-let-index
June 2017 data, July 2017 report
The percentage of households in England and Wales in arrears was 7% in June 2017, well below the 9.6% recorded a month ago which could be an encouraging sign.
Proportion of tenants in arrears remains well below the all-time high of 14.6%, recorded in February 2010.
Thanks for this.
You say “As your tenant will be the lodger’s landlord, it will be up to the tenant to carry out the right to rent check. However, you need to warn them that they need to do this.”
Can you expand on the landlord’s duty to warn T of their obligations when choosing to become a landlord, e.g. it would obviously be sensible and reasonable to do so, but if you do not, do you retain any legal liability if you have not instructed the tenant in their duties and liabilities?
I don’t think that the landlord will be liable for what the tenant does or that they have any actual duty to instruct them in their legal obligations.
However, they can refer their tenant to my Lodger Landlord site http://www.lodgerlandlord.co.uk/ which sets out most of the legal rules which apply to lodgers.
Note that renting a room to a lodger in your own home under a residential license is not the same as renting out a property under an assured shorthold tenancy.
OK. But the landlord does not actually *need* to warn them. In fact, given the differences between ASTs and licences, they are possibly better off not advising them at all unless they have particular knowledge about licences.Otherwise might they risk creating liability where it does not already exist?
You don’t mention Insurance & Mortgage issues.
Good point. Yes, landlords need to check this first too.
The part where it states that a household plus 2 other persons is not an HMO is not correct.
This exemption only applies where a person owns the house or has it on a 21 year lease. It does not apply to rented accommodation. (Housing Act 2004, Sch 14 and Regulations SI 2006-373 Regulation 6(2).
Many thanks, I have now amended the article to take account of this.
My tennant has asked if he can take in a lodger for exactly the reasons you mention. In principle I have no objection to this, however after making some enquiries I cannot find anyone prepared to cover the property insurance wise as a tennant taking in a lodger is considered subletting. It is very frustrating as I have a good tennant, who I am sure would choose a lodger carefully, and yet I can’t help him
I have been making enquiries about this and am pleased to announce that Alan Boswell can provide insurance cover for a landlord whose tenant wants to rent a room to a lodger provided they have a proper lodger license agreement.
If you go here https://www.alanboswell.com/law-16/ they will also try to beat your current insurance premium too. Tell them you were referred by Tessa Shepperson and the Landlord Law Blog and they will look after you.