First time buyer - looking to take a lodger

nocturne_sa

Hi Guys

I'm looking to buy a 2 bed flat in the near future. Plan is to take a lodger and use the extra case to pay off as much mortgage as possible in the next couple of years.

Given that this is all an alien concept to me, I need to be absolutely sure that having a lodger is the best way forward before I actually put an offer on the property. I need advice on the following:

• Are there any specific rules and regulations I need to be aware of with regards to lodgers?

• What legal documents do I use as a lodging agreement?

• I have heard that these agreements might not be legally binding. Is there any truth to that?

• What about the tax implications? I will probably have to self assess and pay tax on the rental after taking into account 'rent a room relief'. Are there any other tax implications?

• More of a subjective question but is renting out a room generally a good idea?

Cheers

molit

- technically you shouldnt do it on most mortgages, as its abother adult living there, as long as you keep up repayments no oneshould find out

- in the past I used a form from whsmiths

- there is a difference between binding, and how mcuh it can cost to act enact them .

- rent a room covers you for up to 4k ish, any more than that you should put in a self assessment, i never needed to when i rented out a room, best to speak to the tax office if you're not sure

-i have had great lodgers, I have had poor lodgers. Personally I'd avoid renting to anyone you know too well, but a distant friend is fine. I would liek to be more definite, but its basically a little like a house share...

00ec25

nocturne_sa wrote: »

Are there any specific rules and regulations I need to be aware of with regards to lodgers?

if you have gas in the house you MUST have have an annual LL gas safety certificate - failure to do so is a criminal offence. A lodger has a licence to occupy, that makes you a qualifying LL - see guidance here

other than that there are no specific regs bjut your insurance will need to be told and may vary your policy. How you run the house is down to your house rules, try to be fair to both you and the lodger - cleaning of kitchen (clean up after yourself), cleaning of common area (you are the householder it is your responsiblity), use of bathroom ... etc etc

nocturne_sa wrote: »

What legal documents do I use as a lodging agreement??

whatever takes your fancy - a lodger has few rights and all you need to document is the rent amount, its payment frequency and what you regard as "reasonable" notice to terminate the arrangement (for both parties)

you can evict a lodger with "reasonable" notice - this is NOT defined in law but will be interpreted to mean a period equivalent to the rental periods eg: monthly rent = 1 month notice. that said if the situation totally breaks down then you have the right to call the police and have then remove the lodger on the spot

do not get sucked into lots of other terms - most of them will be unfair and thus unenforceable

nocturne_sa wrote: »

I have heard that these agreements might not be legally binding. Is there any truth to that???

see above

nocturne_sa wrote: »

What about the tax implications? I will probably have to self assess and pay tax on the rental after taking into account 'rent a room relief'. Are there any other tax implications???

if your income is <£4,250 pa you will not need to SA.
If it is more than that then yes you will need to SA. Note do NOT try to evade tax by pretending that some of the income relates to the lodgers share of the bills. The rent a room scheme gives you a tax free allowance of 4,250 expressly so that you do not have to account for contribution to bills. If you receive more than 4,250 pa it does not matter what you call it, the excess above 4,250 is taxable, you cannot deduct any "expenses" unde the Rar scheme therefore you cannot claim some of the income is to cover their share of bills- see HMRC helpsheet

nocturne_sa wrote: »

More of a subjective question but is renting out a room generally a good idea???

have you ever shared with someone else? If you have then you already know whether you can cope with this,
if not then you will shortly learn a great deal about yourself and it may end in tears if you are intolerant. Yes it is your home but the lodger is a human being too and it will be their home also so there must be some give and take

G_M

molit wrote: »

- technically you shouldnt do it on most mortgages, as its abother adult living there, as long as you keep up repayments no oneshould find out

- in the past I used a form from whsmiths

- there is a difference between binding, and how mcuh it can cost to act enact them .

- rent a room covers you for up to 4k ish, any more than that you should put in a self assessment, i never needed to when i rented out a room, best to speak to the tax office if you're not sure

-i have had great lodgers, I have had poor lodgers. Personally I'd avoid renting to anyone you know too well, but a distant friend is fine. I would liek to be more definite, but its basically a little like a house share...

Ignore most of the above:
Few mortgage lenders will object, but you need to get their agreement in writing. Few will charge extra. It is tenants they have a problem with, not lodgers, so as long as you are living there too, no problem.
Same with your insurance - get their agreement in writing.
Best to have a comprehensive document detailing do/don't to avoid arguements later. Will you allow their visitors? Overnight guests? How often? 6 nights a week!? Who cleans what and when? Who pays for staples (loo paper, washing liquid....).

Any contract is binding (unless it breaks a law...!).

Keep notice periods to a minimum. Better to be able to ask an unpleasant lodger to leave asap even if in return it means your lodger might leave you at short notice too.

This might be useful too.