If you’re a homeowner 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; subsequently, there are several aspects and procedures to be aware of. Equally, you and your new tenant will have certain rights and responsibilities that must be met and adhered to. If not, there can be issues, disagreements and indeed potential legal ramifications for both parties.
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 five 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 to clarify if your property and living circumstances would require such a license.
The prospect of becoming a landlord in any form can be an exciting experience. However, in this scenario, as a live-in landlord, there's a lot more to think about:
The type of tenancy
First and foremost, there's more than one type of living arrangement you could be involved in. If you or a family member shares any facilities or living space with the new occupier, they are considered ‘excluded occupiers’.
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 - which would require you to obtain a licence.
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 £7,500 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
Several legal aspects will need to be explored. As the property owner, 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 Benefits, 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 impact 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 ensure 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 and 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.