Here is a question to the blog clinic from Miles who is a landlord:
How to handle a second property occupied by a Student Daughter (over 21) with a Lodger sharing.
Our Daughter who will be at University until 2015, currently lives in a leasehold property we purchased and is about to take in a Lodger to help with the costs.
Our daughter currently occupies the property on an informal basis at no cost other than Bills. However to take on a lodger we wonder if her status needs to be formalised with a tenancy agreement in order that she has the formal legal right to take in a lodger.
There is also a financial issue here, because we have financial commitments for loans and service charges which we wish the rental from the lodger to offset. At this point our Daughter would have to start paying rent to return this to us.
We prefer the lodger approach because with our Daughter in residence it affords her more flexibility and seems appropriate to the situation.
Can you advise the best course of action for handling the arrangements with our daughter please.
When you let family members stay in a property the law does not always assume that a tenancy will be created (as it would with a stranger) particularly as here where your daughter is not paying rent. It is often assumed in family situations that there is ‘no intention to create legal relations’.
If you want to make it clear that this is not the case, then a tenancy agreement is a good idea. It can also have a psychological effect – signing a document will make the arrangement feel more formal.
So in the case of your daughter, at the moment she almost certainly does not have a tenancy, and her occupation will be an informal family arrangement. So if you want to change this, once she has a lodger , I think a tenancy agreement would be a good idea.
Note thought that if this is not done, it does not mean that she is acting in any way illegally if she takes in a lodger with your consent. However as you suggest, it is better at this stage to adopt a more formal approach.
The standard forms generally prohibit lodgers so you wil need to give her specific approval to take in one lodger. Some tenancy agreement forms (such as mine) allow you to add extra clauses. Otherwise permission can be granted by giving her a letter which can be kept with the tenancy agreement.
Finally, note that your daughter should try to have only students as lodgers as otherwise she may lose her student exemption for Council tax.