What about rent and benefit?

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. Some lodger landlords ask for payment 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 consider getting a standing order form signed by your lodger at the same time he signs the lodger agreement.
• 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.

Dealing with bills

There are basically two options:

• Including bills with your rent, or
• Having an arrangement with your lodger that they will pay a contribution towards the bills separately

How you deal with this is up to you, but whichever option you take should be reflected in your lodger agreement.

If you decide to make bills inclusive, it might be best not to sign up for too long a period as you may find that your bills go up more than you anticipated.  In which case, you will want to have an opportunity to increase the rent if your lodger stays on.

Benefit

This is a generic term used both for housing benefit (which fewer people other than the elderly now receive) and Universal Credit.  There is a gov.uk guidance section on Universal Credit here.

There are many people on 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:

• Applications, whether they are processed by Councils or the Department of Work and Pensions (DWP) generally take a while to be processed and there may be long delays before you get paid – 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 or the DWP 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, problems will not be with your lodger but with the Council/DWP.

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’ (if you can find one).  This will enable the benefit to be paid over to the Credit Union 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.  The only problem is that few Credit Unions now seem to offer this service.  You may need to do some searching around to find one.
• If your lodger is on benefit, get him 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 normally need to have a written agreement, and the benefits office/DWP will probably refuse to process the application until this has been received.  So it is essential that you have one.

Benefit v. rent

Finally, it’s probably worth saying that the Housing Benefit office/DWP 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 he only receives £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 being paid to him as they will not be able to afford this, so effectively, if you take tenants on benefit, your rent will be limited to the 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 (e.g. 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.