Day 13 – What about rent and housing benefit/LHA?

Rent
Today’s topic is in many ways the most important, as for most people the main reason they are renting out a room is for the rent.

The first thing to consider is how much you are going to charge for your room. This will depend upon many things, among them:

• the location of your property – whether it is in a ‘posh’ or run down area, whether it is a convenient location for transport and amenities such as shops, and also whether there is much similar accommodation available nearby (the ‘scarcity value’)
• the size and attractiveness of the room you are renting
• whether you are able to offer facilities such as an en suite bathroom, broadband or off street parking
• any other services you provide, such as meals and cleaning

Have a look around and see what rent other lodger landlords are charging in your area. If you know anyone who takes in lodgers, have a word with them and see what rent they charge. If you let to students, the student accommodation office will advise you.

You also need to consider how you are going to be paid, and how frequently. Many lodger landlords get paid their rent in cash on a weekly basis. Others get paid monthly, perhaps by standing order. Decide which you prefer. Note:

• If you are going to be paid by standing order, you should get the standing order form signed by your lodger at the same time he signs the lodger agreement (Day 15).
• If you are going to be paid in cash, particularly if this is to be weekly, you should give your lodger a printed rent book. These can be bought from most large stationers, or online.

Housing benefit

(Or whatever they are calling it at the time you read this)
There are many people on housing benefit who will be looking for lodgings, for example young people, people recently separated or divorced, or people who need support of some kind. Therefore if you decide to accept lodgers on benefit, you shouldn’t have any problems finding them. But should you accept lodgers on benefit?

There are a number of problems associated with benefit:

• Councils are generally slow to process applications and there are often long delays before payment is made – do you want this?
• Payment is normally made to the occupier rather than to the landlord – so you are basically dependent on the lodger being honest and paying it over to you
• Councils will generally refuse to speak to you about the benefit application due to ‘data protection’ issues.  Even though the benefit is for your rent.

It should be said that in most cases the problems will not be with your lodger but with the Council.

If, despite all this, you decide to accept a lodger on benefit, there are some things you can do to help:

• Learn how the system works (warning – it’s not easy and it keeps changing) so you can deal with things promptly and correctly (and help your lodger do the same).
• Insist that as a condition of being accepted as your lodger, they sign up to a Credit Union ‘jam jar’ account or with the Tasker payment service.  This will enable the benefit to be paid over to the Credit Union/Tasker Payment Service first and they will then will deduct your rent and pay it over to you before the rest of the payment is passed to your lodger.  This will give you some security.  In fact, I would strongly advise that you refuse to accept any benefit lodger who is not signed up to one of these arrangements.
• Get your lodger to sign a housing benefit letter of authority (we have one you can buy) – or preferably several as it is not unknown for Councils to lose them.

Your lodger will need to show the Housing Benefit office a written agreement, and they will probably refuse to process the application until this has been received (see Day 15 for agreements).  So it is essential that you have one.

Benefit v. rent

Finally, it’s probably worth saying that the Housing Benefit office cannot change the terms of your agreement with your lodger by providing for a different rent.

So for example, if your lodger pays you £80 rent per week, but the benefit office will only make payments of £60 per week – this does not mean that your lodger’s rent is no longer £80 per week.

He is still legally liable for the full amount.  But there will be a shortfall which he will need to make up out of his own money. If he does not do this, he will be in arrears of rent. This may, for example, be a reason for you to ask him to leave.

However, in most cases, there is little point in asking a lodger to pay more than the benefit/LHA being paid to him, so effectively, if you take tenants on benefit, your rent will be limited to the Local Housing Allowance rate for your area.

It is entirely up to you whether you accept a lodger on benefit.  If you can find someone suitable who is in employment, or able to pay in some other way (eg a student on a grant) then you are better off going with them.  However, if you have an exceptionally nice lodger on benefit, you may be willing to put up with all the hassle that this can bring.