Everything you need to know about deposits (if you have a lodger)
Taking in a lodger (and sharing your house with them) is very different to letting out a home you don’t live in. Taking in a lodger has fewer legal requirements than letting a whole property, but there are still things to consider – including deposits.
What is a deposit?
A deposit is essentially a sum of money paid to the landlord of a property to cover any damage or unpaid rent. It’s usually paid before the new tenant moves in, and should be returned to the tenant when they leave.
Deductions can be made to deposits for a number of reasons, at the landlord’s discretion. It’s reasonable to get these in writing so there are no disagreements and disputes when the tenant moves out and claims their deposit back.
If you have a lodger, you don’t legally have to take a deposit - but we think it’s still a good idea.
Why should I take a deposit from my lodger?
The bonus of having a lodger is that you share the house with them, so it’s less likely they’ll cause significant damage to the property (in theory). Lodgers also don’t have the right to exclude the landlord from their room, so they shouldn’t have a lock on their door. They have a right to live in your property but don’t have exclusive rights to any part of it – unlike a tenant.
That said, there’s always a chance that any kind of tenant will cause damage or fall behind on rent payments – which is why taking a deposit is a good idea.
Make sure you mention the deposit in your lodger agreement, and clearly outline the reasons you may take deductions from the deposit. SpareRoom has a prewritten, solicitor-approved Lodger Agreement you can purchase here.
How much should I ask for?
The typical deposit is usually a month’s rent, so your lodger would pay you a month up front, plus another month as a deposit.
Do I need to use a deposit protection scheme?
In short: no. If you’re a landlord renting to tenants who live in a property you don’t live in, you’re legally required to hold their deposits in a deposit protection scheme.
As a live-in landlord you have no legal obligations to do this, but it is good practice to keep the money in a separate account – as you do still have to return it to your lodger whenever they move out.
What happens when they move out?
When your lodger leaves, you should return the deposit. If you’re deducting anything from it, make sure you tell them how much and what each deduction is for. Try to be specific and give them a chance to come back to you in case they disagree with something. Most deposits disagreements can be resolved by referring to your Lodger Agreement.
It might be tempting to let your lodger use their deposit as the last month’s rent. We’d advise against it, simply because any damage in the final month (or when your lodger moves out), even if unintentional, then has to be paid for by you.
Download our lodger guide – it’s packed with information and advice, plus a handy checklist of everything you should have covered before you take a lodger in. Available here.
Image credit: @andrewtneel.