Taking in rent free lodger

scorpy66

I'm discussing with a friend who is in dire financial straights the possibility of her moving in with me (she is currently renting, I am owner occupier) for a year or two so that she can hammer her debts - she's currently only paying off £30 pm through an arrangement with the CCCS so it will take her forever otherwise! This would be a rent free arrangement but I would ask her to share bills.

I've checked the Rent a Room scheme and I'm not sure what counts as 'rent' but in any case, she'd only be paying me £200 or so a month for bills so I'd be under the £4K-odd threshold for tax free income anyway - even if it was classed as income.

The above is my take on the situation, but I would hate to run into red tape further down the line and discover too late that I should declare this as 'income' in some way. The bills are all in my name and will stay that way.

Also since she is not a tenant, I shouldn't think we'd need any kind of formal letting agreement - but again, I'm not sure about this.

Any views on the above, in terms of spotting anything that might trip either one of us up, would be gratefully received!

zone

Try and get all the paperwork and agreements set up. So you have the proof of rental income to declare if you need to in future. Possibly for a 12 month AST.

Barneysmom

You do really need to cover yourself, as even the strongest of friendships are tested under these sort of conditions.
You both need something in writing so you can ask her to leave if the going gets to tough?

bristol_pilot

Under the rentaroom scheme, any payment she makes to you counts as income. But you are under the threshold, so that's OK. Are you claiming a council tax discount as a single occupier? - if so, you will lose this when the lodger moves in.

silvercar

She would be a lodger. Get some sort of agreement drawn up agreeing rent and notice etc.

It is not an AST. A lodger living with a landlord, as opposed to occupying alone, is not a tenant within the meaning of the housing acts that incorporate the rules of an AST.

PasturesNew

The only issue might be if you were now in receipt of benefits, or started receiving them in the future.

As a lodger, there's no way she's coming close to more than the Rent a Room amount, and you don't even have to declare it if it isn't.

So I can't see any worries.

hearts

Council tax, you would no longer be a single occupant so increase of 25%...if you tellem ;-)

looby-loo_2

be careful he can't claim half the house

scorpy66

Thanks guys, I've factored in half of the increased council tax (£66 pm will go up to £88 pm) to her share of expenses as I currently get the 25% discount. I am the kind of person who would not sleep at night if I didn't declare it to the council! lol

Barneysmom, point taken about friendships being tested this way! She is my closest friend and we are both thinking and talking lots about the pro's and con's before going ahead. Financially at least, it's win-win for both of us - the rest of it is less certain ground for sure...

Thanks for the advice to draw up a formal agreement, I accept that I was being naive in hoping that wouldn't be necessary. Since the purpose of her moving in is to pay off all of her debts, we have already worked out how long that would take (14 months approx - as opposed to nearer 15 years the way she is currently going!) plus another 2 or 3 months so she can save for a deposit etc. for her own rental place. So perhaps an 18 month agreement with room for earlier notice on either side, would be appropriate?

We're both in our 40's used to living on our own, the compromise on both sides will be pretty hefty and we wouldn't be considering this if there was any other way for her to get debt free. I therefore made clear at the outset that the offer would be time limited and contingent upon her using the freed up cash to pay debts, rather than going on wild shopping sprees! This could be formalised, I guess, but a simple notice period would be far cleaner and cover all eventualities if it wasn't working for whatever reason.

scorpy66

looby-loo wrote: »

I don't know if this would apply.
My friend bought a student house for his daughter to live in whilst at uni for 5 years. After one year her boyfriend moved in and paid no rent but did contribute to bills. At the end of the five years the house was sold and unfortunately just at this time they split up. He was able to say that as he had lived in the house half the profit from the sale was his. He won the case and left with quite a large sum. (They were both training to be solicitors)

It may be different for you but perhaps you should check it out.

That is gobsmacking!!! I will definitely look into it. I hope my ex who lived with me for 10 years doesn't come across this one too.....

beaujolais-nouveau

scorpy66 wrote: »

That is gobsmacking!!! I will definitely look into it. I hope my ex who lived with me for 10 years doesn't come across this one too.....

I was nearly caught by this, too. When my business-debt-laden former husband divorced me, he wanted half what he called "the marital home". Luckily for me, the mortgage was in my name alone (since I took it out 17 years earlier, long before I met him), and - although he had done some DIY - he had never directly made any of the mortgage repayments.