AST for tenant’s lodger?

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14:03 PM, 30th September 2019, About 5 years ago 11

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My tenant in a very popular area of the city occupies a Victorian terraced house with three double bedrooms and two receptions. She is self employed and has been there for over three years living with her two children.

The house is under utilised as it is easily big enough to accommodate four adults which is my preferred model of tenancy. She is a good tenant and always pays the rent on time, keeps the house and garden in tip top state and even does actual repairs and improvements in her own time and expense, as she sees it as her home.

This sounds ideal except for one problem.

My managing agent originally signed her up for quite a low rent, at that time it was about £300pm below market and now stands at about £600pm below market due to Bristol rents skyrocketing and a lack of available places to rent, and also the agent’s neglect in asking her for regular rent increases.

I have told her via my agent the rent will be going up more than 12% in a few months time and she responded in writing asking me to consider a lower increase as this would be unaffordable to her, children at a local school, part of the community etc. I’m very sympathetic to her situation and don’t want to make her and children seek a new home and would be happy to keep her, but unfortunately I really need the extra rent to pay my own bills.

My idea would be for her to stay and continue paying the same rent, but to give up one the receptions and rent out that room to a lodger.
That could probably bring in £500 to £600pm which she would transfer to me. The question is how to structure the arrangement as a lodger could leave any time and I would want her to have flexibility to get another one when needed. Also they would not be equally sharing the rent as the lodger would be paying proportionally more for his/her one bedroom, though sharing the kitchen, bathroom and other reception etc. I wouldn’t really want the lodger to know the amount of rent my tenant pays as this could lead to issues.

Can I have an AST with my tenant and a separate AST with the lodger, who now also becomes my tenant? Or should I keep my tenant with the existing AST and the lodger has a signed agreement with my tenant just to sublet a room?

Or is there a better way?

All suggestions appreciated.

Bristol Landlord

Editors Note:

House in multiple occupation licence

A house in multiple occupation (HMO) is a property rented out by at least 3 people who are not from 1 ‘household’ (for example a family) but share facilities like the bathroom and kitchen. It’s sometimes called a ‘house share’.

If you want to rent out your property as a house in multiple occupation in England or Wales you must contact your council to check if you need a licence.

You must have a licence if you’re renting out a large HMO in England or Wales. Your property is defined as a large HMO if all of the following apply:

it is rented to 5 or more people who form more than 1 household
some or all tenants share toilet, bathroom or kitchen facilities
at least 1 tenant pays rent (or their employer pays it for them)

Even if your property is smaller and rented to fewer people, you may still need a licence depending on the area. Check with your council.

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Comments

Bristol Landlord

18:18 PM, 7th October 2019, About 5 years ago

Hello
Thank you so much for all the past and recent comments.
I just want to clarify that in no way did I ever intend or even attempt to impose a lodger on my tenant. What happened is that I notified her of an upcoming substantial rent increase within the terms of our AST, she replied that she coudnt afford it and so I suggested a solution of how to better utilise the house in order to get more rental income. There is no way I could possibly force her to take a lodger if she didnt want to as the situation would inevitably fall apart at some point and create an ever bigger problem for me to deal with. The lodger idea could only have ever worked if the tenant was fully on board.
Moving on, there seem to be two schools of thought on this issue. The first is that Im not doing the tenant or myself any favours by letting my tenant carry on living in a house that she cant really afford as Im still responsible for major repairs and maintenance. The second is that I should do my best to keep a tenant who has a track record of being a good tenant in all respects. That there is a danger in pushing out a good tenant and replacing them with a new and unknown tenant who despite paying a higher rent could end up being a problem.
IMHO both thoughts are correct, the dividing line being the amount of rent we are talking about.
If its a case of maybe 200 or 300 pm in lower rent then its definitely worth keeping the existing and good tenant. If its a case of being 600 to 800 pm lower then the balance swings in favour of asking her to find another place to live. Right now I have a lot of financial pressure and really need the extra rent. I am really trying to work with her on this issue as Im not the cruel and heartless landlord as depicted by Shelter and the Government. The thing is how long should I work with her if she refuses to compromise on her current deal which in reality is quite unfeasible for me to keep going. Looking at local rents she is currently paying the rent of a 2 or 3 bed flat in the immediate neigbourhood or of a 3 bed house but quite a few streets away in a not so convenient area.
Im still waiting to hear back from her and will update when I know more.

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