What could be easier? You have a spare room in your house, you know of plenty of people who are looking for somewhere to live, and you have the chance to earn a little extra cash from the rent you can charge.
Under the official Rent a Room scheme, HM Revenue & Customs (HMRC) even encourages the practice of people lodging in this way by granting the householder a tax-free allowance of up to £7,500 on the income earned from the rents you charge.
A guide for resident landlords
As a guide published by the Department of Housing, Communities and Local Government explains, however, the relationship between a landlord and someone lodging in your property is somewhat less straightforward.
The guide stresses the importance of any arrangement where the landlord is “resident” in the property.
If the landlord lives elsewhere, for example, tenants typically have the status of “regulated” tenancies, commonly on an assured shorthold basis. In those cases, landlords have specific duties and obligations, tenants are protected by specific protections against eviction and may challenge the amount of rent they are charged.
When the landlord is also a resident, however, tenants or lodgers have fewer protections.
Tenant or lodger?
The situation is further complicated by the differences in status which tenants and lodgers are granted when the landlord also lives on the premises.
The chief distinction here is whether the landlord shares any part of the accommodation (including, say, the toilet, bathroom and kitchen) with the lodger; or whether the lodger has exclusive right to occupy a particular room or rooms in a self-contained flat.
In the former case, the lodger is said to have a “licence to occupy” part of the property and share its facilities on the basis of an “excluded tenancy”; whilst in the latter case, the tenant enjoys all the rights and privileges of an assured or regulated tenancy.
Rent a room insurance
Whether you have granted a lodger an excluded tenancy or a tenant a regulated tenancy in premises in which you are also resident as the landlord, however, the situation is thankfully much less complicated when it comes to live-in landlord insurance.
On whatever basis you have let a room in the dwelling in which you also live, specialist live-in landlord insurance offers the protection and safeguards you need for your home and the risks you may be taking on when offering lodging accommodation or a tenancy.
The insurance recognises the distinctive relationship between a resident landlord and both (“excluded”) lodgers and (“regulated”) tenants but continues to provide the protection you need to safeguard the building itself against such significant risks as floods, storm damage, fire, impacts, vandalism and theft.
For the resident landlord, there may also be a greater risk of theft, loss or damage to his own belongings and possessions, so the element of contents insurance may play a greater part in any rent a room insurance.
It might be argued that the resident landlord’s exposure to claims of negligence are also higher when the property is shared with tenants or lodgers. If a tenant or lodger suffers an injury or has their property damaged, for instance, they may hold you responsible as the landlord and claim a significant amount in compensation.
Live-in landlord insurance, therefore, typically includes indemnity against such claims and the cost of defending them.