Avoiding a tenancy in a self contained letting

I did an advice recently for a client who wanted to let out some self contained accommodation in his house (effectively a ‘granny annex’) but was anxious to avoid creating a tenancy. Although this is covered in part here,  I thought that it might be worth repeating some of the advice I gave him:

To prevent a tenancy being created you need to ensure that the occupier does not have ‘exclusive occupation’ of the property/rooms.  This means that you have to have built into your contract, reasons for you to go in and out of them (respecting your occupiers privacy) as of right (ie without having to ask permission first).  Here are some suggestions:

• Tip 1 – Provide clean sheets (and perhaps towels)  You do not need to make the bed. but it gives you a excuse to go in and out of the room/s without question.  Make a practice of actually going into the rooms rather than just leaving the sheets in the passage outside
• Tip 2 – Provide room cleaning.  If you do not want to do the cleaning yourself, employ a cleaner (and set the rent so the cleaner’s costs are covered).  Make it clear to the occupier that the cleaner is part of the deal as you want to be sure that the property is being properly looked after
• Tip 3 – deal with putting out the occupiers rubbish for them.  For example provide black bin bags and say that you will be going into their kitchen area to collect them once or twice a week (depending on when the bin men come).
• Tip 4 – require access to test the smoke alarms regularly.  Needless to say, you will have to have smoke alarms fitted for this, but you should have this anyway
• Tip 5 – provide breakfast and /or other meals from time to time, which can be served in their rooms if you prefer.

Where you are renting out self contained rooms in your home, where you do not share living accommodation with the occupier, you do need to be careful to prevent a tenancy arising (particularly if it is important that there is not tenancy, for example if this is a requirement of your mortgage company).

However so long as provide at least two services such as those listed above (ideally at least clean sheets and cleaning, and preferably more than two) you should be all right – so long as you continue to provide them.  If you stop, the occupation may convert to a tenancy.

Note also that as you do not share living accommodation, the eviction procedure set out in Day 20 of my 21 days of tips, cannot be used.

Taking in a lodger is not the same as taking in a tenant, and a formal lodger agreement is less essential. Many lodger landlords never use a formal written agreement, and operate on a handshake and mutual trust.

However although this is fine when things are going well, if there are any problems, it is a great help to have a formal agreement setting out your rights and obligations. Unlike tenancies, these things are not normally ‘implied’ into agreements by statute, so if there is no written agreement, it can be difficult to know how to deal with problems that may arise (for example see Day 19).

A formal agreement drafted by a lawyer is therefore a good idea, in addition to any ‘house rules’ list you may draw up (discussed on Day 14). The formal agreement will cover things you may not have thought of, and will protect your position.

For example, a helpful clause, often found in lodger agreements, makes the lodgers license to occupy the property end automatically, if he stops living in the property or fails to pay rent for two or more months.

Other standard clauses cover

• termination and notice periods,
• prohibitions about damaging the property and anti social behaviour, and
• details of any services you will be providing.

I also like to include a clause reminding the lodger that he is personally responsible for the behaviour of his guests (for example if they cause any damage).

The Unfair Terms in Consumer Contracts Regulations 1999
These are regulations which all of us who draft tenancy and other occupation agreements need to take into account when drafting. They apply to all contacts (not just those for occupation of a property) between someone acting in the course of a business and a consumer (you can read more about this on >> the OFT web-site here).

In most situations where a homeowner (or tenant) is letting a room to a lodger, these regulations will not apply, as they are aimed at businesses not people making a bit of money from renting out a room. However if you have several lodgers, particularly if it is your main source of income, you might be classed as a business. If so, the regulations *will* apply to you.

This is why, when drafting lodger agreements, I try to stick to the principles of the regulations, although perhaps not as rigorously as I would for a tenancy agreement.

Generally the thrust of the regulations is towards clarity and fairness. This is no bad thing, and if your lodger sees that the agreement you are using is evenhanded and doesn’t try to take advantage of him, he will be happier about signing it. It is also a good idea to try to get an agreement which is written in plain English as this will be easier for both of you to understand.

Practicalities
If you decide to use a professionally drafted agreement (and on balance I think this is best), be careful to fill it out properly, making sure that all spellings are correct, and that the property is correctly described.

As with all such agreements, there should be two copies. You should end up with one signed by the lodger, and he should end up with one signed by you. It may be easier if you both sign both of them.

If there are any other documents involved, such as house rules (Day 14), and an inventory (Day 16), these should be signed at the same time, and attached to the main lodger agreement (for example by stapling them together or using a treasury tag), which should refer to them.

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What is your experience of the things in this section? Do you use a formal lodger agreement? Have you had any situations where you have needed to refer to it to resolve a dispute? Are there any particular clauses you would want to see in a lodger agreement (for example if we provide one)?

Note: You can buy our standard lodger agreement in the Lodger Landlord shop for £12, or get it cheaper as part of our >> New Lodger Pack plus.