Tenancy deposits and lodgers

Although I wrote about this on Day 16 of my 21 days of tips for lodger landlords, I think it is worth repeating.

• The tenancy deposit regulations only apply to assured shorthold tenancies
• It is legally impossible for someone renting a room in your home to have an assured shorthold tenancy
• Therefore tenancy deposits taken from lodgers do not need to be protected on a government authorised tenancy deposit scheme.

Expanding a bit on this, most lodgers will not have a tenancy at all, as they will not have ‘exclusive occupation’ of their room.  See more of this on Day 1 of the 21 days of tips and my five tips on how to avoid creating a tenancy.

Even if your lodger does acquire a tenancy of his bedroom, it is not possible for this to be an assured shorthold tenancy.  This is because the Housing Act 1988 specifically excludes tenancies with resident landlords from being assured shorthold tenancies.

The only time an AST can be created where the landlord lives in the same building is where that building is a purpose built block of flats and the landlord lives in one and the tenant in another.

So if your lodger tells you that you are breaking the law by not protecting the deposit he has paid, do not worry, he is wrong.

Our last few tips have looked a problem lodger situations, but of course this is not the norm.  Most lodgers get on very well with their landlord.  However all good things have to end, and sooner or later the day will come when your lodger leaves.

There are many reasons.  Most of my lodgers, for example, were students who were only ever going to stay for a limited time. Perhaps your lodger is moving elsewhere for his job, or has decided to rent a flat or even buy his own place.

You should try to make your lodger’s departure as pleasant as possible, if only because he will then be more likely to recommend you to other people.

Here is a list of the things you need to deal with.

If you have taken a deposit
You will need to check the condition of your lodger’s room against the inventory (inventories are discussed on day 16), this should be done shortly before they go.  It is  best if you do this with your lodger present and both go through the inventory together.

Hopefully the room will be in a spotless condition and you will be able to refund the deposit there and then. Otherwise proceed as follows:

• If you know how much it will cost to deal with the damage (for example if it is a broken desk lamp which you know you can replace for £15) you can simply deduct this from the deposit and pay the balance
• If you do not know the replacement cost or the cost of repair work, say them you cannot refund the deposit immediately. Get contact details and say that you will contact him once you know. Make sure you do this promptly.  It the delay is going to be longer than a week, give him a ring and let them know the reason for the delay.
• Once you know the cost, either send him the balance or arrange for him to call round for it, if your lodger prefers to be paid in cash.
• If there are rent arrears, you deduct this from the deposit after any damage has been deducted first.

Fair wear and tear – this is an important rule about deductions from deposits.   When considering deductions, you should not expect a property (ie for a tenancy) or a room (ie for a lodger let) to be in the same pristine condition it was in when the lodger moved in.  This is particularly the case if your lodger been there for a long time.  So long as the rooms is in a reasonable condition for the amont of time your lodger has been living in it, that is all you can expect.

This means that you will not normally be entitled to charge for cleaning or redecoration.  Unless your lodger has been smoking in his room in breach of his lodger agreement (see day 15), and the décor and furnishings have been damaged by the smoke.

Visitors book
I had a visitors book and got my lodgers to write in it on their last day.  They were always happy to do this (and always had a good look through the other entries), which means that I now have something to remember them by.  You do forget, and I think this is a nice thing to do.

Post
If your lodger gets a lot of post, suggest they arrange for a postal redirect. If you don’t mind re-directing their post for them, don’t forget to get their forwarding address!

However you will not want to act as an unpaid mail forwarding service forever.  Make it clear that you will only do this for a couple of months, and that post received after this will be sent back marked ‘return to sender’.

On the day that they leave
If they still owe you any rent, make sure you get a payment from them before they go.  Otherwise it may be difficult.

Make sure their room is checked properly before they go.  I once had a Japanese student leave £20 in travellers cheques in the bin.  If you find it now, this will save having to forward it on to them.

Unpaid rent
If your lodger is hard up or on a low income, in most cases you will not get paid, and it is best to accept this and move on.

However if you want to pursue it, be aware that the only way you can force someone to pay if they refuse to pay voluntarily, is by getting a County Court Judgement (CCJ) in the Small Claims Court (there is a money claims online service). You will need to have the new address for service of the court papers, so it is a important to get a forwarding address from your lodger before he goes.

After your lodger has gone
You have your room back! Lodgers are nice, but sometimes it is also nice to have your privacy back.  However if you need the money, you will have to start the whole process of getting a new lodger to take his place.

If you are the one moving out
Be aware that your lodger will only have lodger status (discussed on  day 1) if you are living in the property with him and sharing living accommodation. If you move out permanently, for example to go and work in another town, your ‘lodger’ will become a tenant.

As you will no longer be a resident landlord, the tenancy your lodger will acquire will be an assured shorthold tenancy.  The change will happen at the time when you move out.  You should therefore get your lodger to sign up a proper AST agreement when you go. You can find out more, and get tenancy agreements, from our Landlord Law service.

If you are selling your property, you should get your lodger to move out, at least by the time you are ready to exchange contracts, as your purchasers may not want to sign if he is still living there.

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What is your experience of the things in this section? Do you keep a visitors book? Have your lodgers ever left unusual or valuable things behind? Have you ever taken a lodger to court for unpaid rent?

Note – please see also this >> later post on dealing with possessions left behind

Inventories and deposits tend to go together. Again, these are things that not all lodger landlords will bother with. However, when letting a stranger into your house, there is no harm in being careful.

A deposit is a payment taken for the landlord to hold against any damage to the property or breakages. If when the lodger leaves, things are in good condition and there are no rent arrears, the money should be returned.

Lodger landlords are in a better position than landlords of properties rented out to tenants under assured shorthold tenancies (ASTs). There are now regulations requiring AST landlords to protect all deposits with >> a government authorised tenancy deposit scheme. However as a lodger does not have a tenancy, any deposit taken does not need to be protected.

Even if the lodger does somehow acquire a tenancy, the deposit still won’t need to be protected (so long as you are still living in the property), as tenancies with resident landlords cannot be ASTs.

However, even though a deposit may not need to be protected in a government scheme, this does not mean you should not take care of it. It is best to put it in a separate account, so you won’t be tempted to spend it. Remember – its not your money!

If you take a deposit, you need a way to check the condition of the room and contents when the lodger leaves against the condition they were in when he moved in (see Day 21). This is where inventories come in.

An inventory is a detailed list of all the contents of a property, including details of its condition. For a lodger situation it is probably a bit ‘over the top’ to prepare an inventory of the whole house or flat (or such parts of it as the lodger has access to). However it is a good idea to have an inventory for the lodgers own room.

If you decide to do an inventory, you need to make a list of all (and I mean all) the contents of the room. This includes things such as

• all furniture,
• curtains,
• carpet/rugs
• duvets and pillows,
• any electrical items (e.g. bedside lamp),
• pictures,
• light shades, etc

Many inventories also include details of immovable things such as

• walls,
• doors,
• window frames
• light fittings, etc.

You should say a bit about each item, such as ‘good condition’, ‘new’, or ‘scratch on right hand drawer’. If there is anything valuable in the room, it might be worth taking a photo of it (or even a video). Keep receipts for all items purchased or repaired, just in case.

When the lodger comes to sign the lodger agreement (Day 15), you should show him round his room and check over the inventory with him. He will need to agree it – if you spot anything not on it (another scratch perhaps) make sure this gets written in. Then you and the lodger need to sign the inventory (one copy each), to confirm that it is agreed by you both. It should then be attached to the lodger agreement (one for each of you).

If you use photos, these should also be signed and dated (to prove that they are not pictures created at a later date), with copies for each of you, and also kept with the paper work. Be careful with photos, if you use them. Judges and arbitrators often say that they are useless, as they are frequently unclear, out of focus, with nothing to show the scale. A picture of a scratch on its own could be anywhere.

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What is your experience of the things in this section? Do you take a deposit? Did you need to make any deductions from it? Do you use an inventory and if so do you think it is worth the bother of drawing it up?

The interview
This is an important part of the selection process. However, remember that prospective lodgers will also be checking out *you*, so put your best face forward and make sure the house is nice and clean and welcoming.

It is often a good idea to have someone whose opinion your trust with you when you interview. Their views may be helpful when making up your mind, plus it will give you some protection if the interviewee turns nasty.

You may make you mind up fairly quickly when interviewing prospective lodgers. However even if you have decided to accept them, you should take full details and deal with the interview in a professional way.

Taking details
Have the details you took over the telephone with you (see Day 10), and make sure you have paper and a pen to write down other information. It is also often a good idea to get them to fill in a pre printed form first (this can include the question on previous convictions referred to in Day 3), as this will make sure that you do not forget anything important.

This can also have a box for them to tick to confirm that they consent to your using a tenant referencing service (see Day 12), if you are going to use one of these (and this is generally a good idea). Written consent is necessary if you use one of these services.

Suggested questions
Here is a list of suggestions for points to cover at the interview. You may have other things you want to add to this:

• You will need to discuss their financial circumstances, such as their salary – do not feel embarrassed about this as this is what is going to pay your rent!
• You should also ask to see some identification, such as a passport, or driving license – check it carefully!
• Discuss standards of cleanliness, and say whether or not you will expect them to share the cleaning. NB If you are to do the cleaning this should be reflected in the rent
• Whether or not you will allow pets
• Your policy on visitors, particularly overnight visitors. You need to find out if these are likely – for example, if they will be regularly having their girlfriend stay overnight, do you want this?
• Tell them about the arrangements for the use of the kitchen, if you are not providing meals.
• Discuss any arrangements for using the telephone, although most people will probably now have their own mobile.
• Say whether bills are included or to be paid separately. If they are paid separately you need to be very clear about how their contributions are to be calculated
• Ask if they will be bringing any of their own electrical equipment. You won’t want them using power hungry appliances which will run up your bills, nor unsafe equipment which could cause a fire. If in doubt insist on an electrical safety test
• Many lodgers will want to use their computer in their room and may require internet access. Offering this will make your accommodation more attractive. However if you do not have a computer or do not want to share access with your lodger, this should not be a problem as there are mobile internet services available now
• Be clear about what, if any, services you will be providing, such as cleaning, clean sheets and towels etc. It is a good idea to at least provide clean sheets, as this will give you a reason to visit the room regularly (as discussed on Day 1).

Deposits
It is generally a good idea to take a deposit, and if you are going to do this, you should say so now. If the lodger genuinely cannot afford to pay a deposit there are a number of schemes to help, particularly for lodgers on benefit. If you suspect your lodger may be in this situation, have a list of these to ready to give out (your local Citizens Advice Bureau will be able to let you know what schemes are available in your area).

At the end of the interview
Never accept anyone immediately, even if you have decided to offer them the room. Always take their number and say you will ring them back. Make sure you do ring them back though, even if you are ringing to say that you are sorry but you have let to someone else.

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What is your experience of the things in this section? Do you have any tips for others about interviewing? Are there any other questions which should be asked? Do you take a deposit?

Note: There is a lodger application form and checklist in my New Lodger pack – read about it >> here.