I know it sounds odd (as lodgers are not normally tenants) but the Tenant Fees Act applies to lodgers and lodger agreements.
I don’t think it was deliberately aimed at lodger situations but the legislation extends to residential licenses. And as most lodgers will have a residential license – it will apply.
So what does that mean? This post will give some brief guidance. First –
Under the Tenant Fees Act, you can only take a deposit of up to 5 weeks worth of rent. You need to be careful about working this out, but we have a free form you can use for this here.
You can take up to six weeks worth of rent as a deposit if the annual rent is over £50,000 pa but I doubt that will be the case with many lodger arrangements!
You are also allowed under the rules to take a holding deposit from applicants (when you are looking for a new lodger) of up to one week’s worth of rent which you can hold for up to 15 days – or longer by agreement with the applicant. After that you will have to refund it to the lodger (or maybe offset it against the rent with their agreement) unless:
- The applicant fails a right to rent check
- The applicant has lied to you and you are able to prove this (for example if they gave their salary at one figure but their employer said it was something else, or if they said they had no CCJ’s but a credit check shows that they did).
- The applicant decides not to proceed
- The applicant fails to sign your agreement within the 15 days or agreed time.
Of course, whether you actually keep the money is up to you. I suspect most lodger landlords don’t take a holding deposit anyway. This legislation was really designed for tenancies.
Note by the way that tenancy deposits do not need to be protected in a scheme as the legislation which deals with that only applies to assured shorthold tenancies.
The Tenant Fees Act is mostly about fees and so we need to talk about the fees you are entitled to charge. The rule is that ALL charges are prohibited unless specifically allowed by the act. Rent, you will be happy to learn, is a permitted fee!
Most lodger agreements do not charge many fees apart from the rent, by just for the record here is a list of the things you can charge (apart from the rent and the deposits discussed above):
- A fee for lost keys limited to £50 (inclusive of VAT) or the actual cost of replacement
- A fee limited to £50 (inclusive of VAT) for varying the agreement
- A charge for late payment of rent of 3% above base rate once the rent is in arrears of 14 days, payable from default until payment
- Council tax, and utilities
- Payment for a TV license
- Payments for communication services such as a landline telephone, broadband, satellite TV
- Green deal charges
Now, most of these are not charged for separately for lodger agreements. as most things are rolled into the agreement although sometimes landlords will make a separate charge for utilities (which is OK).
If you want to make any other charges – such as for laundry or for meals, then for it to be allowable the lodger must be given a genuine choice as to whether to use it or not.
Which will usually be the case – as they will (for example) have the option to use a launderette instead or maybe wash their smalls in the sink. Or eat a takeaway in their room.
Enforcement and penalties
This is where lodger landlords score over ‘proper’ landlords – as failure to comply with the rules will prevent landlords using the section 21 eviction process. But as lodger landlords don’t need to get a court order – that won’t be a problem!
It is possible that the Local Authority may seek to impose charges if they find out that you are charging illegal charges and the lodgers will have the right to bring a claim at the First Tier Tribunal to claim it back.
Our Lodger Agreements
Although the previous version of our lodger agreement was not actually non-compliant, we have now amended our agreements (and the accompanying notes) to bring them into line with the new rules. They now claim the correct interest rate for rent arrears and we have added a clause to allow you to make the claim for lost keys.
As always with our agreements, you can add any other clauses you want in the additional clauses box at the end.
You can see all our lodger forms here.