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Renting out your spare room – a good idea, but plan ahead

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By Pieta Das Gupta, Head of Legal, Rocket Lawyer UK

With the cost of living continuing to rise, and pay rises struggling to keep pace, renting out your spare room might seem like an easy way to raise some extra cash. After all, many of us have shared a house or flat at some point in our lives – it can’t be that hard to arrange, can it?

Actually, the short answer is – it’s a bit harder than you think. Not difficult, certainly. However, there’s more to the process than simply finding a housemate and hoping you’ll get along. As a property owner, you have specific legal obligations that you need to be aware of and you’re likely to need to get some consents before you can go ahead.

For example, if you have a mortgage, you’ll probably need the permission of your mortgage provider before you let out your room. For many providers, this may well be a formality – but it’ll take time to get the paperwork in place. Likewise, if you own your property as a leaseholder, you may have to get your landlord’s permission first. Failure to tell either party might invalidate your home insurance – not a nice thought if your lodger accidentally floods your bathroom.

And then there’s the certificates you need to sort out: the energy performance certificate; the gas safety certificate; the electrical wiring certificate. Each of these quality standards takes time and money to arrange – and each comes with financial or legal penalties for non-compliance.

With these preliminary issues taken care of, you’ll also need to sort out stuff like rent, deposit and notice periods. You’ll also want to give yourself maximum legal protection in case the worst happens – if your lodger damages your property, or doesn’t pay their rent. So make sure you sign a legally binding agreement which makes it clear where you stand on all these issues and sets out the ground rules.

Here’s where Rocket Lawyer can help. Firstly, you can read our helpful guide on taking in a lodger. It sets out all of the factors to consider I mentioned above – and more – and also includes some useful links to relevant official website. Moreover, you can use our online business documents to draft various different property agreements, depending on whether you plan to live at the property you’re renting out. What’s more, Rocket Lawyer members can even speak to one of our nation-wide chain of expert lawyers for free.

If all this is making you have second thoughts about renting out your room, consider this. Under the government’s “Rent a room” scheme, you’re allowed to earn up to £4,250 per year tax free from letting out a furnished room in your own home. So yes, there’s paperwork to wade through, expenses to incur, and certificates to obtain – but the rewards are there.

If you prepare properly, you might even make a new friend for life, as well as improving your bank balance. But that’s probably more likely to happen if you’ve sorted out all the legal issues upfront and don’t end up squabbling over who owns the ironing board when your lodger decides to move out.

Written by Pieta Das Gupta

Pieta Das Gupta

I have over ten years’ experience as a company commercial solicitor working in law firms and for businesses. As the Head of Legal for Rocket Lawyer UK, I am in charge of legal content and work with the product development team to create the documents and guidance available on our website.

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