Factsheet 5: Flatshare House Share (Lodgers)

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1 This factsheet is designed to inform and assist individuals who wish to set up a house or flat sharing arrangement so that it operates legally, fairly and smoothly. Background: The word house share or flat share can mean a number of different things to different people, but this factsheet does not address them all. This factsheet is aimed at people who own or rent a property and wish to invite a lodger into their home. The lodger will have the use of a bedroom in the home for himself, and will share the use of the bathroom, kitchen, living room and other communal areas with the landlord. This factsheet does not cover tenants who share a property together, nor does it address situations where the property owner lets rooms to different people in his house, but does not live there himself. The benefits of sharing your home with a lodger can be many, but there are costs and disadvantages as well. This factsheet explains the options available to a home-owner or tenant who wishes to earn some extra money by letting a room or floor in his house or flat to a lodger, as well as the pros and cons of doing so, and tips for making the process as easy as possible. Many people may not have considered the option of letting a spare room to a lodger, but it can be an excellent way to earn some extra money from your property, and is becoming more and more popular. In the past, taking in lodgers has been thought of as the preserve of ageing women who provided meals as well as laundry and cleaning services. This image has changed beyond recognition as now many live-landlords are young professionals or families looking to make some extra cash from the spare rooms in their houses or flats. The founder of has recently stated that adverts by resident landlords make up about half of all rooms available listings on the website. 1 / 5

2 Types of Home Sharing: One of the main advantages of letting a room to a lodger is that (as described below in Home Sharing and the Law ) the arrangement is very flexible, and it is open to the parties to agree between themselves the terms that suit them. There is no need for a lengthy minimum term for the arrangement, and either person can end the agreement by giving notice for any reason at all. The only legal requirement is that reasonable notice is given to the other party of the desire to leave. Therefore a home share arrangement of this type might have a minimum term of just one month, or of any longer period such as three or six months. The landlord has the flexibility of being able to try home sharing out for a while without committing to continuing in the future, and can take breaks from having a lodger once one leaves. For example, a couple who have a 19 year old child might decide that while he is on his gap year they will get a lodger in to fill his room and earn some extra money to help to pay for university fees. If the arrangement works well then they might choose to advertise for a lodger to stay during the university term time while their son is away. One example of an inventive way to let a room is to do so on a Monday to Friday let basis. Under this model, in return for paying rent the lodger is granted permission to live in the room and to use the shared facilities as described above, but only from Monday to Friday each week. This model is typically utilised by people who have a home of their own, perhaps with a family, in one area of the country, but work elsewhere and need somewhere to stay during the week while they are at work. The benefit for the landlord is that a Monday to Friday let will still provide a significant additional income, but the house will be empty at the weekend, allowing the landlord some peace and privacy, and perhaps using the lodger s room for friends of family guests. A number of different people may choose to have a lodger in their home, and for various reasons: 2 / 5

3 - A family whose child or children have left home leaving empty rooms - A young professional or a couple who have bought a house with an extra bedroom but currently do not need it and rent it out to a lodger to help to pay the mortgage - An older person or couple who no longer need all of the space in their home, and want the extra income. Home Sharing and the Law: Sharing is a concept that has been widely recognised in law for centuries. Through the legal mechanism of joint tenancy and tenancy in common people may jointly own moveable assets and land. It is also possible to write contracts which allow assets and land to be shared with others even if ownership is not shared. This is the type of contract required to govern a home share arrangement, as the lodger will be gaining the contractual right to use the room subject to certain conditions, but they certainly will not be gaining any ownership of the property. For such a contract to be enforceable it is important that both parties provide consideration (e.g. money, time or services) and that the sharing is not simply a gift by one person to the other. In a home share the consideration provided by the parties is the payment of rent by the lodger and the grant of permission to use the room by the landlord. The landlord may also provide other services as agreed between the parties. The type of agreement that this factsheet deals with is called a licence rather than a tenancy, because rather than providing an arrangement for the lodger to live in the property that is protected by statute, he is simply given a licence (meaning permission ) to reside in the room that has been let to him while the landlord allows him to do so. This arrangement is very flexible for both the landlord and the lodger (known as the licensee) and can be terminated on reasonable notice, with no specific legal requirements. 3 / 5

4 Although it is advisable in many situations to have a written agreement to regulate a sharing relationship, there is nothing in law to prevent an informal arrangement being agreed verbally. However, difficulties with a verbal agreement arise when one party wants to prove the contents of the agreement and the others disagree about what was said. It is strongly recommended that a written agreement is entered into to at least cover the key issues of rent, length of the arrangement and termination. There is a Government Rent a Room Scheme that can provide tax advantages to people who rent out space in their home to others. The resources section of this factsheet provides links to websites that can provide more detailed information about the scheme, but the main points are as follows: - 4,250 earned per year from renting a room, rooms or floor in your only or main home is tax free. This can save higher rate taxpayers up to 1,700 in tax per year. - Up to this limit there is no need to even declare any such income to HM Revenue and Customs. Any additional income received over this threshold will need to be declared to HM Revenue and Customs in a tax return and will be taxed. Beware that the 4,250 limit can quite easily be exceeded in popular areas where rooms rent out for over 350 per month. - The amount paid by the lodger for additional services such as laundry and meals is included in the 4,250 limit, even if the actual rent is less than this. - The scheme is available to both home owners and tenants, provided that tenants check with their landlord or local authority as appropriate for approval first. - If you are renting out the room or rooms jointly with another person, such as the co-owner of your house, then the 4,250 allowance is a total amount for the property and is divided between you both and you each get 2,125 tax free. - The scheme only applies to furnished rooms, and bathroom and kitchen facilities in the home must be shared in order to qualify - The scheme does not cover renting a self contained flat out - The scheme is optional and it may be more efficient for some people, especially those who already complete a tax return, to account to HM Revenue and Customs for the income, and in that instance you will be able to offset the expenses of providing the accommodation (such as ear and tear, insurance, repairs, heating and lighting) against the income received from it. For details of how to opt in and out of the scheme, see the Direct Gov web page shown below in the Resources section of this factsheet. 4 / 5

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