Any rules on taking a deposit from a lodger?

paddy's_mum

I'm thinking of taking in a lodger to help with the bills. I've tried to do my homework, including getting the Landlordzone recommended book by Rosy Border.

Several publications (including odpm and the above named book) recommend taking a deposit to set against any possible future damage or non-payment of rent. However, what none of them make clear is whether the new TDS rules apply to a lodger's deposit, as opposed to that of a tenant.

I think it's probably prudent to have some sort of recourse against a lodger but don't want to fall foul of the rules. Anybody have any thoughts on this? Thanks.

m1ntie

I rent rooms in my house and take a deposit equivelent to 1 months rent. TDS does not apply - it only applies to STAs.

Regards

tbs624

You may want to keep it in a totally separate deposit account, and confirm with your lodger what would happen to any interest received on it. Your Lodger Agreement should also specify under what circumstances you would seek to make any deductions.

Good to see that some potential LLs do their homework

Do a search for BadgerLady's thread on her lodgers - it may give you some good ideas on what to get firm agreement on.

Good luck with it all.

sdooley

What's most important is to not get off on a bad start with them - it's not like being a landlord they are in your home. Making it clear that this is a commercial arrangement is fine, but also let them know you're not intending to deduct anything from it just for the sake of it. Offering to keep it in a separate account shows your bona fides.

SurfChick

Hi

Please make sure you cover EVERY eventuality to include a lodger licence or tenancy agreement, depending on whether you meet the criteria for the rent-a-room scheme. Check out the 'lodger-zone' link below.

Please make sure you do credit checks and pay for a 'comprehensive' tenant referencing agency, like letsure [links below] and charge this to your lodger as part of initial administration costs, it is quite usual to do this [if you do not do credit checks and have any repercussions from a bad lodger you will have no legal power for recourse if you haven't done this I think!] You may also have to purchase a standard agreement, so include this cost aswell...remember you are in this to MAKE money, not spend it! Please note, you must make any potential lodger aware of all admin costs at point of viewing, so maybe have it all to hand. Also be clear in your mind what proportion of bills you want, how much the bills are to indicate this to any potential tenant and agree things like phone/internet usage, etc...the kind of bills that can spiral and cause grief!

Either that, or pay someone like LetSure to take the risk for you. Make sure you take one months rental deposit and one FULL CALENDAR months rent in advance, to be cleared funds BEFORE your lodger moves in. PLEASE BE RUTHLESS IN YOUR SELECTION AND VETTING PROCESS...someone will be living in YOUR sanctuary!

There are certain rental agencies that will, for a one off fee, run and introductory service between landlords and tenants. You could also pay them a percentage to find, vett and manage any lodger, even within your own home if you are in any way concerned.

http://www.landlordzone.co.uk/lodgers_rent-a-room.htm

http://www.tenant-reference.co.uk/

http://www.letsure.co.uk/index.htm
Sorry for the ramble...once bitten, twice shy!! Hope this helps! Good luck, lodgers are great for the finances! :j
SurfChick

tbs624

Some good points there SurfChick - just a couple of comments:

SurfChick wrote: »

......if you do not do credit checks and have any repercussions from a bad lodger you will have no legal power for recourse if you haven't done this I think!] ..

As posted in another thread on tenant checks - an okay check result only means the tenant or lodger has the ability to pay and that they haven't defaulted in the past - it doesn't necessarily mean that they will pay up in the future.However, not doing a credit check does not affect your course of action if a Lodger owes you money under your agreement: you have the usual small claims scenario to fall back on.

SurfChick wrote: »

You may also have to purchase a standard agreement, so include this cost aswell...remember you are in this to MAKE money, not spend it! ..

Are you working up to a job as a Letting Agent? The contract safeguards both parties: I think asking a Lodger to pay for the purchase of the Agreement is just wrong, and would set you off on the wrong footing. Do you also ask him/her to pay for the pen to sign it too?

SurfChick

Hi tbs

Thanks! Just to say, I once had trouble with a lodger and the judge queried strongly that I had not been procedurally correct in not obtaining references and credit checks so just felt I'd share it!! Judge was v.harsh about it and as a result we did not get awarded the full share of rent owed...our lovely legal system, eh! It just made me vow to always over-cover my back in the future and to help others do the same. It is a big undertaking, having a potential stranger in your house...the safer the better in my opinion!!;)

Secondly, I've moved 5 times in last 4 years and for 4 of those rental properties I have had to pay an admin fee to cover credit checks and the cost of any agreement...shocking but totally acceptable in the rental market!

As for the pen...LOL...you can get free pens from most banks, tbs!!! HeHe!:p

tbs624

SurfChick wrote: »

.....Secondly, I've moved 5 times in last 4 years and for 4 of those rental properties I have had to pay an admin fee to cover credit checks and the cost of any agreement...shocking but totally acceptable in the rental market!

my own highlighting. Hmmm..not sure how something can qualify as both "shocking" and "totally acceptable" ?

There are lots of tenants (and many self-managing LLs) who view those type of admin fees as anything *but* acceptable, and as increasing regulation of the private lettings market gets under way it will be one of the areas that comes under increasing scrutiny.

Do a forum search on this very topic ..think maybe you had better run for cover Surfchick ...;)