Taking On A Lodger

With many feeling the pinch of the credit crunch, taking in a lodger might be a good way to earn much-needed extra cash.

The lump sum deposit, regular monthly payments and the additional benefit that the first £4250 earned from taking in a lodger is tax free makes this idea attractive to those with a spare room in their home.

However, be wary. Taking on a lodger needs informed planning to avoid the legal pitfalls and you should carefully consider the practicalities of sharing your home with a stranger.

Lodger, Tenant or Licensee?

A lodger is a guest who is charged rent but who, as a general rule, shares your kitchen and bathroom facilities. They are different to tenants, who usually occupy a separate part of your property, such as a self contained basement. They are also different to licensees who simply have your permission to live in your home rent-free.

Legal Implications

It is often (wrongly!) assumed that, unlike tenants, taking on a lodger is an informal relationship and is not governed by law.

In fact, as a residential occupier, the Protection from Eviction Act 1977 (the ‘1977 Act’) makes it unlawful to evict a lodger who occupies the property as their main residence without due process of the law. An example of illegal eviction is changing the locks without giving the lodger reasonable notice, which may be ‘immediately’ or within say 28 days depending on the circumstances.

Failure to comply with the 1977 Act can result in criminal conviction and civil claims for compensation of as much as £20,000. The Protection from Harassment Act 1997 has similar consequences.

It, therefore, makes sense for the rights and obligations of each party to be outlined in advance in a written Licence Agreement. A Licence Agreement should set out the room/s to be occupied, how much notice is required by either party and what each party is required to pay for. Setting matters out clearly from the start can help to avoid costly dispute later.

Practical Realities

It almost goes without saying that you need to be very careful who you take in as a lodger, especially when there are children in the home.

You should always obtain references and protect yourself against fraud by requesting identification and carrying out thorough credit searches.

On an emotional level, unlike tenants, lodgers will be sharing the communal areas of your home and may effectively become part of the family. Whilst this can work well, it is important to consider the impact on your immediate family as there is the risk that the home is no longer a haven with a stranger in the midst.

General Rules

Whilst taking on a lodger can have great benefits, you should think carefully about the implications.

Thorough research is a must and there are lots of websites providing helpful advice about taking on lodgers. However, given the legal consequences of getting things wrong, you should get legal advice before asking a lodger to move into or to leave your home.

Foot Anstey’s Property Litigation Team are able to offer specialist advice at competitive rates on the law relating to lodgers and offer fixed fee Licence Agreements for only £150 plus VAT*.

Contact Anna Phillips to find out more on this issue or for further advice. 

*Price correct at time of article publish date 

Published 28/08/2008. The author of this article is Anna Phillips