Guide to lodging: 'It's nice to come home to a friendly face'
As more homeowners than ever before turn to a lodger to help pay the bills, Graham Norwood presents the essential guide to the latest middle-class survival tactic
Friday 15 October 2010
The downturn has created many twists and turns in the housing market but perhaps none as unlikely as the renaissance of an old-fashioned concept – the lodger. Tightening household belts have obliged a rising number of homeowners to consider letting out a room; likewise the high costs of formal accommodation from rented flats to hotels and hostels, have persuaded many people to look for more modest places to stay. The result is that the lodger is back.
"I wanted extra money to fund my social life and to put money into ISAs and a pension, and lodging seemed ideal," explains Helen Simpson, a legal manager from Leamington Spa. She now has Richard Boyd as a lodger at her flat from Monday to Friday.
"I asked for references and bank statements, interviewed people and wasn't afraid to turn down those I didn't feel quite comfortable with. Richard pays by direct debit and put down a deposit. It's flexible – so far it's lasted six months but his circumstances or mine might change, so it's easy to extend or bring to a halt," says Helen.
Boyd, a design engineer at the Aston Martin luxury car firm in Leamington Spa, has his own home in Sussex but during the week has the full run of the communal rooms in Helen's flat. Sometimes he and Helen will eat or watch television together in the evening after work.
"It's much cheaper than a bed and breakfast. If I rented a place of my own just for four nights a week it would be complicated and expensive. Lodging is a very simple solution. Helen and I get on well and it's nice to come back to a friendly face. I used the internet to find a lodging agency, then I short-listed four places that were in the right location that suited my price range. Helen's was by far the best, so here I am," he says.
Helen and Richard are not unusual. A string of online services now offer to match would-be landlords and lodgers and one, www.spareroom.co.uk, says the darkening economic mood has created a surge of interest. It claims there are 32 per cent more people using its site than this time last year and that the average lodging rent per week is just £88 – less than the price of one night in a modest hotel in many cities.
While insurance company Liverpool Victoria says the numbers of lodgers have soared 15 per cent in the last three years to levels not seen since the 1960s. And that 37 per cent of those renting out a room need the income to pay their mortgage.
"We saw a spike in home owners advertising for lodgers in January when many were suffering a post-Christmas financial hangover. We then saw a further spike after the Coalition's Budget in June and numbers have been on an upward trend ever since. We expect another spike following the Government's spending review on 20 October," explains Spareroom's director, Matt Hutchinson.
So if you own or rent a home with a room to spare, how do you attract a lodger?
The extra money may be useful but you lose at least some privacy, may have to share communal areas and always have the feeling of someone in your home. If you are an owner-occupier check with your mortgage lender. You may get a consent-to-let status, which will allow you to have a lodger and keep your existing conventional loan. A stroppy lender, however, may oblige you to take out a buy-to-let style loan, which will be more expensive. Let your household and contents insurer know of your lodging intentions, too. And if you are a private renter you can still let out a spare room if it is appropriate, but you will need your landlord's consent and your sub-letting should be written into the contract. Again, inform your contents insurer.
HOW MUCH CAN YOU CHARGE?
This depends on what you offer your lodger – in addition to the room will you provide meals, cleaning or laundry? If so, you may be wise to itemise this in your contract with your tenant. Also you can join the Government's Rent-A-Room scheme, which allows you an income from your tenant of £4,250 a year tax-free – that is about £350 per month. The room or rooms let must be furnished and must not form a completely self-contained element of your home; in other words, you should share a front door and communal areas with your lodger. Under Rent-A-Room you cannot claim expenses such as wear and tear, insurance, repairs, heating and lighting.
GO IT ALONE OR USE AN AGENT?
Many people who take in lodgers choose not to opt in to Rent-A-Room, because being outside means they can offset their legitimate expenses – ranging from part of the insurance to new light bulbs for the let room – against their tax liability. Another choice you'll have to make is whether or not to use an agent. Lodging used to be very informal but now, if you wish to be more formal, there are many agencies that will find and vet tenants, draw up contracts and even handle health and safety checks on your home. You pay handsomely for this, while the alternative could be as simple as a notice in a local paper or shop, or an online classified advertisement – but then you have to manage the tenancy yourself.
It makes sense to set out terms and conditions, from what areas are out of bounds to how much notice is given to end the arrangement. Websites like www.lawpack.co.uk have model contracts that can be downloaded at low cost. It is also sensible to check the financial viability of a lodger (financial security firms like www.equifax.co.uk and www.experian.co.uk will do this for you for a small charge). Insist your lodger pays by standing order – this avoids regular uncomfortable face-to-face requests for payments. And don't forget that annual gas safety checks are required, conducted by Gas Safe-registered engineers and all furniture should be of modern safety standards.
Agencies that help find and manage lodgers include Spare Room (0845 644 4029, www.spareroom.com), House Pals (0871 474 0108, www.housepals.co.uk), Easy Room Mate ( uk.easyroommate.com), Flat Night Fever (020 8846 3278, www.flatnightfever.co.uk) and Monday to Friday (www.mondaytofriday.com).The Rent-A-Room scheme and its tax implications and regulations are covered at www.hmrc.gov.uk and www.direct.gov.uk.
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