My tenants have asked about taking in a lodger

I have rented a 4 bed house to four professional sharers for the last 7 years. Three of the sharers have been in the property from day one, the remaining tenant has been there for two years. 

When the new tenant moved in two years ago they were given a new six month AST, they were served a section 21 notice in accordance with my strategy and then given a 5 year Deed of Assurance which assured them that I would pay compensation of £3,000 if I obtained possession within 5 years for reasons other than default.

The tenant who moved in 2 years ago has now decided to buy a flat. The remaining tenants want to stay. They have found a replacement but he has failed financial referencing and now they, like me, are unsure what to do.

The reason the new person has failed referencing is that he has only been in the country for 4 months and his employment contract is temporary.

If the new tenant had passed referencing the plan was to issue a new AST, serve a new section 21 (1) b and grant a new 5 year Deed of Assurance.

Given that such an arrangement would make all tenants jointly and severally liable this concerns the original three tenants. A default on the part of the new tenant would leave them out of pocket and I might have to seek possession in the event of the new tenant defaulting if they don’t pay his rent. They are actually more concerned about this than I am. Apart from that they are very comfortable with the new tenant as he is a long standing friend of one of the existing tenants cousins and they all get on well with him socially. He also works for the same employer as two of the existing tenants.

One solution we have considered is for the three existing tenants to stick with their existing contract which is now a statutory periodic tenancy and with the benefit of their Deed of Assurance for three remaining years. The proposal is that I would give them permission to take in a lodger and they would have a lodger agreement with the incoming tenant.

The benefit of this arrangement is that if the incoming tenant defaults my existing tenants could throw him out within a week and then find another lodger, thus protecting their tenancy and Deed of Assurance.

In principal I am comfortable with this arrangement but I would like to share this concept with the Property118 community to see if you can think of any complications which I might have overlooked.

One question which is bugging me is whether I should get the outgoing tenant to sign a Deed of Surrender and how this might affect the remaining three given that the AST is joint and several.  Would I also need to get the remaining three tenants to sign something to release the outgoing tenant from the joint and several liability and for them to accept the liability is now joint and several between the remaining three? We could just start a new AST and Deed of Assurance with the remaining three tenants, however, this is not preferable to me not them. The reason is they would be tied in for 6 months and I wouldn’t be able to seek possession for 6 months either.

I look forward to reading your comments.

Kind regards

Mark Alexander

Share This Article