Should you take a deposit?
A deposit is a payment taken by 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.
You may be aware of the tenancy deposit rules which require landlords to protect deposits in a government-authorised scheme.
However, these do not apply to lodger landlords.
In England
The deposit protection rules only apply to Assured Shorthold Tenancies. So you do not need to protect a deposit taken for a lodger.
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.
You may need to explain this to your lodger as they may not realise that lodger deposits are not covered under the deposit rules. If they refuse to believe you, refer them to this page on the housing charity Shelter website.
So far as the amount of the deposit is concerned, you are subject to the Tenant Fees regulations which limit the amount you can take to five weeks worth of rent (if the annual rent is over £50,000 you can take up to six weeks’ worth of rent, but few if any lodgers will pay this amount!).
You can work out the correct amount to take with the deposit calculator below.
In Wales
In Wales, the deposit protection rules only apply to occupation contracts – unless you state otherwise (and why would you want to do that?).
The rules which limit deposits to five (or six) weeks’ worth of rent do not apply in Wales. So in Wales, you can take more than five weeks’ worth of rent if you wish.
This will probably only be appropriate if you permit them to keep a pet (such as a dog) which could cause damage.
The need for an inventory
If you take a deposit, you will need some way to check whether the condition of the lodger’s room and its contents have deteriorated since the room was first let.
The normal way to do this is to prepare an inventory which sets out everything in the room, and gives details of the room itself, describing its condition and state of repair.
Although it is a bit of a bother, it is probably worth getting an inventory done up, particularly if your lodger is likely to stay some time. You will be thankful that you did if there is a dispute about deductions from the deposit when the lodger comes to leave.
Your Law Store
If you want to create an inventory, note that we have a form you can use to prepare this, together with detailed guidance, which you can purchase from our Your Law Store website.
How to deal with deposits
Even though a deposit does not need to be protected in a government scheme, this does not mean you should not take care of it. If possible, it is best to put it in a separate account, so you won’t be tempted to spend it. Remember – it’s not your money!
Your lodger will probably want a receipt for their deposit payment and you should provide them with this.
Although you may be tempted, it’s best not to use the deposit until the lodger leaves. The whole purpose of the deposit is that it is a fund you can use to deal with any damage or breakages you find after the lodger has gone. If you use the deposit, for example, to cover rent arrears, you will not have any money available for this.
Ideally, you will have prepared an inventory of your lodger’s room and can check this when they go. Then you can use this if your lodger challenges any deductions that you may make.
When you pay your lodgers deposit money back to them, make sure you get a receipt, particularly if you pay them in cash.
Readers Questions
Q: I made a deduction for damage done to my property and my lodger is disputing this and saying that the damage was not done by her. How do I deal with this?
A: There is no free adjudication service for lodger deposits as there are with the tenancy deposit scheme for tenants. So if the lodger feels you are withholding money unjustifiably, her remedy is to bring a claim against you in the County Court.
Few lodgers will do this, but it is not something you will want to risk. So only make deductions if you are certain that you can justify it (ie that if necessary you can prove that the damage was down to the lodger) and that you can also justify that the amount you are deducting is reasonable. For example by providing receipts for items purchased and work done.
Inventory form
The Your Law Store inventory form is specifically designed for lodger landlords and comes with a guidance article explaining what you need to do.
Information flagged with the Welsh flag only applies in Wales.
Important note
This guide ONLY deals with lodger agreements where you are renting a room to a lodger in your own home.
If you require information about tenancies with resident landlords and Welsh occupation contracts, you need the Landlord Law site.
