What to Check Before Renting a Room in Your Home

Taking a lodger is never as simple as advertising a room and sending your chosen applicant an assured shorthold lodger agreement via PDF, though both are essential. In this post, we’ll highlight eight things to check when setting up a successful lodger/landlord arrangement.

1. Your Current Mortgage

Even as a homeowner, you don’t instantly have the right to rent out a spare room. In fact, many mortgages prohibit this. Review your terms; you might have to swap to a buy-to-let mortgage.

Contact your provider for written permission — even if the mortgage doesn’t explicitly ban letting rooms. They might even ask to change your interest rate if they know you’re also earning rental income.

2. Your Council Obligations

Depending on how many lodgers you take on, your property could become a “House in Multiple Occupation” (HMO). If five or more people live there, you’ll need a licence from the council — or you could face a severe fine.

In addition, if you previously lived alone, you’ll lose your 25% single-person council tax discount. However, you can arrange to collect the lodger’s amount via their rent.

3. The Rent-a-Room Scheme

If you rent a room in your home to someone else, you can earn up to £7,500 tax-free. However, the room must be furnished — you also can’t use this to let your property while you’re away. You don’t need to apply for this scheme; it’s automatic and works on an opt-out basis.

If your rental income exceeds £7,500 a year, you could instead deduct £7,500 from your taxable rental income. However, it’s less of a hassle to stay within the scheme’s limits.

4. A Lodger’s Right to Rent

A lodger is the same as any other tenant, and you need to check their right to rent. For British nationals, this involves looking over their documents and verifying their identity. For non-citizens working in the UK, you must check their share code.

British citizens only need to provide a passport (even an expired one will work) or a certificate of registration/naturalisation. However, if an applicant can’t provide the right documents, you must deny them.

5. Your Lodger Agreement

You must make sure you have an airtight lodger contract before you even start advertising your property. Otherwise, you could spend days waiting for someone to draft it. However, a document template website gives you a pre-written agreement that’s still legally binding.

Any template site worth using can instantly generate a lodger lease with space for the following:

• The landlord’s and lodger’s personal details
• A description of the areas the lodger can access
• General house rules (e.g., noise, pets, guests)
• Rent rates and frequency
• Details on the deposit and your protection scheme
• If utility bills are included in the rent
• The contract’s length and renewal process

You’ll need to provide specific details, such as the lodger’s name. Once you do this, you’ll get a low-cost lodger agreement that fits your situation.

6. Home Insurance

Adding a lodger to your home massively affects your home insurance package — in fact, certain providers won’t cover you at all if you have one. They may also limit your theft coverage in case the lodger steals from you.

Providers view lodgers as a major risk. Even in the best-case scenario, they could increase your premiums or require additional liability insurance before agreeing to continue your coverage.

7. The Property’s Habitability

When your property becomes a rental dwelling, you’ll have a legal obligation to maintain it to set standards. However, this shouldn’t be difficult; here’s what you’ll need to do:

• Ensure there are working fire alarms on every floor with accommodation
• Check that the property’s electrical systems/appliances are safe to use
• For added security, you can get an Electrical Installation Condition Report
• Provide the renter with a copy of your property’s Gas Safety Certificate
• Ensure tenants have ample access to the property’s fire escape routes

8. Boundaries With Lodgers

Finding the balance between being a housemate and a landlord can be tricky. For example, the lodger may come to you about property-related matters while you’re trying to sleep. They’ll also likely struggle to let their guard down or see you as a friend.

The boundaries you set are up to you, though it’s healthy to maintain some distance. Otherwise, they might take advantage of what they perceive to be a growing friendship to avoid timely rent payments.

These boundaries go both ways, however — for example, you should never enter your lodger’s room without permission. If you respect their privacy and don’t push the rules too hard, you’ll have a great relationship with your tenant.

Final Thoughts

Becoming a live-in landlord opens up many logistical questions, including how practical such an arrangement will be. However, with the right contract (and your own due diligence), you’ll find a great lodger who treats the property with care.