Due to the recession many people have decided to rent out spare rooms in their properties to tenants in order to make some extra money. As there has never been more demand for private rental properties there has also been an increase in people looking for spare rooms in houses to live in, meaning that the situation can end up benefitting all. Furthermore, the government has allowed those that rent out spare rooms a tax free income of up to £4,250 a year and not even have to declare it on their tax returns.
The National Landlord Association has also recently given some advice on becoming a live-in-landlord, with David Cox from the Association saying: “Conduct background checks on potential lodgers, such as credit checks and references from previous employers or landlords. Issue a lodger agreement to cover issues such as house rules and, bills, insurance, pets and use of shared space. Many chose not to formalise the agreement but it can be useful if there were problems later down the line.”
“It is important to note that a lodger is not the same as a tenant. A lodger only becomes a tenant if they have exclusive possession of their room – for instance a lock is installed on their bedroom door to which you as a landlord do not have a key. Ultimately, a lodger is living in your home. The law allows homeowners to simply ask lodgers to leave if necessary without the need to obtain a court order.”
Those that become live-in-landlords have been warned however that they can only rent one room out in order to benefit from the tax free income scheme, and that they will not be able to claim for expenses like other landlords such as accountants’ fees, maintenance and repairs. There have also been warnings that if you are planning on taking on a lodger then you will need to contact your home insurance provider first, as many contracts could become void, and you may have to take out landlord insurance to cover your property instead.
Finally, it has been said that landlords need to take care with whom they agree to rent out a room in their house, with Sam Cowen from the specialist website SpareRoom.co.uk saying: “Renting out a room isn’t like selling your car – you don’t just take the first person who comes along and can afford it. Take the time to pick someone you think will be a good match for you and your lifestyle.”