If you’re a home-owner considering letting out a room or part of your home to a tenant while you’re also living there, you’ll become what’s known as a ‘live in’ or ‘resident’ landlord. This differs from a typical private let and subsequently there are several aspects and procedures to be aware of. Equally, both you and your new tenant will have certain rights and responsibilities that need to be met and adhered to. If not, there can be issues, disagreements and indeed potential legal ramifications for both parties.
Following on from our recent post which discussed the feasibility of tenants subletting a rental property and essentially becoming a resident landlord, here we focus on what’s specifically involved for homeowners that are interested in becoming a ‘live in’ landlord.
Becoming a ‘live in landlord’
To quickly recap, becoming a live in landlord is when you, as the home-owner, lease a room or a proportion of your accommodation in your main or permanent residence with another person.
While you don’t need a licence for this, this isn’t a decision you should take lightly. However you should be aware that if you’re leasing to three or more tenants who aren’t from the same family, you become a house in multiple occupation (HMO) and if the property is ‘3 or more storeys high’ and ‘occupied by 5 or more people’ you’ll need a licence.
The private rental section of the Government’s official website advises that some councils ‘can include other types of HMOs for licensing’. The direct.gov website allows you to identify your local authority and obtain contact details in order to clarify if your property and living circumstances would require such a license.
What to consider first before making the decision:
The prospect of becoming a landlord in any form can be an exciting experience, however in this scenario as a live in landlord, you need to think about:
The type of tenancy
First and foremost, there can be more than one type of living arrangement involved here. If you or a family member shares any facilities or living space with the new occupier then they are considered an ‘excluded occupier’.
Alternatively, if the room they live in is solely theirs and they don’t share any facilities then the person has ‘exclusive occupation’ – and ultimately more rights, similar to an assured shorthold tenancy. For instance, you’d need to give them notice before entering their room.
The tenant or tenants
There’s also the matter of how many people you wish to let rooms to and whether this borders on the previously mentioned HMO status. Furthermore, you’ll still want to carry out thorough tenant referencing, especially for people you don’t already know.
Who pays the bills?
This is ultimately determined by your tenancy agreement, but it’s more than likely that you as the landlord will cover the costs of their utilities in the rent, as they’ll be the ones already set up in your name. You can of course install separate meters as an alternative option.
Also with your council tax, if you were living alone and receiving a sole occupancy discount this will no longer be the case unless the tenant is exempt. So you should consider this too when deciding on the rent rates.
Are there any tax breaks?
There’s a Government scheme in place called ‘The Rent a Room Scheme’ which ‘lets you earn up to a threshold of £4,250 per year tax-free from letting out furnished accommodation in your home’. This website details how it works and whether or not you’re eligible for the scheme. Otherwise, you’ll need to complete a tax return and declare your earnings if they’re above this amount.
Making everything legal
A number of legal aspects need to be explored. As the owner of the property you may need to alter your mortgage contract to allow you to let to the tenant; you may need to consider landlord insurance. If you receive Housing Benefit, this can be affected too, so it’s worth checking with your local authority to see if any of these changes to your circumstances will have an impact on your payments.
Even though it’s your home, you’ll be legally obliged to have furnishings and fittings that meet safety standards. This might mean you need to invest in newer facilities for your property to make sure that it’s safe for someone to live in.
To keep the arrangement clear and concise, you should investigate the above and draw up detailed tenancy agreements that outline everything from:
- Rental agreements (including bills)
- Rights and responsibilities for you and your tenants
- The nature of the tenancy
- Tenancy length
- Notice periods
Is being a live-in landlord for you?
Another big question to ask yourself is whether or not you’ll be happy to share your home with another person regardless of the tenancy type. Remember the amount of interior space you have will be reduced and you’ll need to respect the personal boundaries of your new tenants.
There’s also the issue of cost. As well as any potential upgrades to your property you might need to make to adhere to compliance standards, you need to be sure you can afford repairs for potential damages along with wear and tear.
Finally, as the landlord you’ll also need to be objective, firm and fair if there does come a time where you have disagreements about payments or living arrangements – after all it’s your home.
In short, you can indeed become a live in landlord in your own home, but like with any private let, ensuring you’re on the right side of the law, that everything is clearly put down in writing and you feel you can manage this lifestyle is essential. This way you can avoid any problematic situations occurring and get the most from your personal ventures into the world of private lets.