There are two big problems in housing just now:
- The need for many landlords to increase rents (to cover their own increasing expenses), which is making many properties unaffordable for tenants and
- The general shortage of accommodation
A bill to allow tenants to take in a lodger would help with both of these at no cost to the government. Here’s how:
How a lodger law would help
Many tenants are struggling to pay their rent.
Allowing them to take in a lodger would help with this, as well as helping to ease the housing crisis.
If tenants are able to take in a lodger, this will provide an additional source of accommodation for single people and also for students. Both these groups often struggle to find somewhere affordable to live.
Owner occupiers can rent a room to lodgers so it is only fair that tenants should be able to do likewise.
Current problems with permitting lodgers in rented property
Landlords will not normally allow tenants to take in a lodger as this would (unless they are a sole tenant living alone) turn the property into a House in Multiple Occupation (HMO).
A property will, in most cases, be an HMO if there are three or more occupants who form two or more ‘households’. If there are five or more occupants who form two or more households, then (in England), mandatory licensing will apply. (Different rules apply to flats, and there are some added complications, which I am not going into here).
So say a family of four take in a lodger to help them pay their rent, this will (in England) immediately make the property subject to mandatory licensing.
- The lodger will be deemed to be a separate ‘household’ under the current rules, and
- The number of occupiers will have risen to 5.
Landlords will not want to deal with the HMO rules as it will increase their costs. If the property becomes subject to licensing they will have to pay the license fee and may be ordered by the Council to carry out expensive renovations as a condition of being granted a license.
Treating the property as an HMO will add a layer of bureaucracy and regulation, which is not warranted where a family just takes in one lodger. It is quite a different situation from a ‘proper’ HMO where several unrelated people share living accommodation – for example by renting rooms in a shared house.
Allowing tenants to sublet is also prohibited by many buy-to-let mortgages and insurance policies.
NB For information about lodgers and the applicable laws, see my Lodger Landlord website.
Note, incidentally, that there is no HMO problem if just one sole tenant takes in one lodger as the HMO rules provide that you cannot have an HMO where just two people live in a property. However, if another person moves in (for example, the tenant’s partner), then this will immediately cause the property to become an HMO.
My suggested solution
If the rules could be changed to make it easier for landlords to permit tenants to rent out a room to a lodger, this would help struggling families and could make the difference between being able to pay the rent and being evicted and made homeless.
This could be achieved by changing the law so that where a lodger shares living accommodation with a family (household) who occupy the property as their only or principal home, that lodger will be treated as a member of the tenant’s household for the purposes of HMO licensing & the management regs.
After all, certain employees (such as carers and nannies) are treated as members of a household, so why not a lodger?
How this would work in practice
The landlord would rent to the tenants, who would, in turn, sublet to the lodger.
So, the tenant will be the lodger’s landlord (but referred to in this paper as ‘the tenant’), and there will be no contractual relationship between the landlord and the lodger.
Note that by default (i.e. if there is no tenancy agreement or no tenancy agreement lodger prohibition), tenants are currently able to have lodgers. It is the prohibition in their tenancy agreement which prevents this.
The tenancy agreement clause
Under my proposed legislation, Landlords would still be able to have a prohibition clause in their tenancy agreements forbidding lodgers.
However, like pet prohibition clauses, this would need to contain wording providing for the tenant to be able to request permission for a lodger, which permission should not be unreasonably refused (it is arguable that this wording is already required under the Unfair Terms rules in the Consumer Rights Act 2015).
So, if a tenant wanted to have a lodger, they would need to request permission from their landlord in writing.
Rules on refusing or granting permission
The landlord would be able to refuse permission but only on reasonable grounds – for example, if having the lodger would make the property overcrowded. Or if it was prohibited by their ‘headlease’.
However, in most cases, the landlord would be expected to grant permission, although they would be able to make reasonable conditions. For example, on condition that the lodger be referenced, right-to-rent checked and required to sign a lodger agreement, and that permission is limited to just one lodger.
If the landlord failed to respond to the tenant’s request or refused permission unreasonably, this would arguably mean the tenant was legally entitled to rent to the permitted lodger.
Lodgers as household members
Under the proposed legislation, the lodger would be deemed to be a member of the tenant’s ‘household’. This would prevent the lodger from turning the property into an HMO (as you cannot have an HMO where all the occupiers form one household).
If the lodger proved unsatisfactory, the tenants would be able to evict them easily as lodgers who share living accommodation with their landlord are ‘excluded occupiers’ under section 3A of the Protection From Eviction Act 1977. Meaning that the tenant would be able to evict the lodger without needing to get a Court Order for Possession first.
There would remain the twin problems of buy-to-let mortgage and insurance contractual terms prohibiting tenants from subletting to lodgers. But hopefully, these can be overcome if the practice is legitimised in legislation.
Precautionary measures in the legislation
I suggest that any legislation should provide:
- That the new rule only applies where tenants (and if more than one, at least one of them) are living in the property as their only or principal home. So it will not apply in a situation where tenants are subletting to occupiers when they themselves are living elsewhere.
- The tenants must share living accommodation with the lodger. This must be ‘proper’ living accommodation such as a kitchen, bathroom and living room, not just halls, corridors, stairs and cupboards.
- Taking in a lodger must not cause the property to become overcrowded
- I propose that just one lodger be permitted to be part of the tenant’s household under this legislation, although no doubt the legislation can reserve the right for the Secretary of State to change this number if it is considered appropriate.
- The new law could be achieved by amending the Housing Act 2004 along the following lines:
Draft legislation
Here is some suggested wording:
Where:
- A property is rented to one or more individuals (the tenant) who form one household and who occupy the property as their only or principal home, and
- The tenants rent out accommodation in the property to an individual (the lodger) and share accommodation* with the lodger
Provided the lodger does not cause the property to be overcrowded as defined in sections 324 and 325 of the Housing Act 1985, the lodger shall be treated as a member of the tenant’s household for the purposes of Part 2 and Section 234 of the Housing Act 2004, so long as the tenant (or if the tenant consists of more than one individual, at least one of them) continue to occupy the property as their only or principal home.
The number of lodgers who can be treated as a member of the tenant’s household shall be limited to one.
* “Accommodation” does not include an area used for storage, or a staircase, passage, corridor or other means of access.
Advantages and disadvantages
Landlords:
If their tenants can take in a lodger, this will result in fewer rent arrears, with no risk that the landlord will become subject to onerous HMO rules.
Tenants:
This could make the difference between paying the rent and being made homeless (after being evicted for rent arrears). It will also help generally with the cost of living.
The Government Rent a Room scheme provides that £7,500 pa can be earned tax-free, and it is only fair that tenants as well as homeowners should be able to take advantage of this.
Society:
- Allowing families to take in a lodger will help ease the housing crisis, particularly for single people and for students.
- If fewer tenants are being evicted for non-payment of rent, this will reduce the pressure on the Courts.
- It is also a solution which will not require any funding from the government, so in that respect, it will be easy to implement.
And finally
Traditionally, many homeowners have been able to earn extra cash by renting out a room in their home. However, this is not something that has been open to tenants as their landlords have had no alternative but to refuse permission as otherwise (unless it is a sole tenant renting to one lodger) they will fall within the HMO rules.
This proposed legislation would resolve this problem and help many tenants avoid eviction and be better able to afford the cost of living.
All at no cost to the government.
What do YOU think?
The post Election 2024 How changing the law on lodgers could make rented property more affordable appeared first on The Landlord Law Blog.