So your tenant wants to take in a lodger? Be careful, be very careful …

The problems:

Your mortgage

If you are buying the property with a mortgage – the terms of your mortgage deed may (and probably will) prohibit tenant subletting. So allowing the tenant to take a lodger will put you in breach of the terms of your mortgage and may technically entitle the lender to call the loan in.

Your insurance

Your landlord insurance policy may also prohibit it. Which is even more serious as it would mean that your insurance company would be entitled to refuse to pay out on any claims. As you would be in breach of your agreement.

Note that some insurance policies DO allow subletting – but you need to check as most don’t.

HMO implications

The other, really important thing to consider is that allowing your tenant to take in a lodger may turn your property into an HMO.

If you just rent to one tenant who lives in the property on their own – this will not be a problem as two occupiers can never create an HMO.

However, unless the lodger is a relative (or is deemed to be in the same ‘household’ as the tenant) then allowing the lodger will usually mean that there are three or more occupiers in two or more ‘households’.

This will create an HMO and will make you liable under the HMO Management regulations. Landlord Law members will find a FAQ about these here.

If allowing the lodger would bring the number of occupiers to over five – then this will create a licensable HMO – which would be expensive as you will need to get a license from the Council. And you will probably be ordered to carry out expensive renovations at the property as a condition of getting it.

So always check carefully before permitting lodgers. Landlord Law members will find a long helpful article here

If you decide to permit lodgers

You will need to have some kind of formal agreement. We have a handy form (one of our additional tenancy forms) which Landlord Law members can use. This will amend the terms of your tenancy agreement and includes a number of special clauses to protect your position.

We also have a form of lodger agreement which you can give to your tenant to use with our documents (and there are other forms which can be purchased online here).

And finally

Allowing your tenant to keep a lodger may seem the ideal answer to your tenants financial problems. However, you need to be very careful indeed and make sure none of the problems listed above applies before permitting this.

If you do decide to allow lodgers though, we have a number of forms for Landlord Law members which can help.