Part 2 of my series looking at different types of tenancy agreements.
There are two main ways of dealing with shared houses:
- Getting all the tenants to sign the same tenancy agreement on a ‘joint and several basis’ or
- Giving them all their own individual tenancy agreement for their own room and shared use of the rest of the property
Which one you use really depends on the circumstances. There are good points and bad points.
Good points about renting rooms in a shared house
- If one tenant has to leave and a new tenant takes his place, you do not need to get all the other tenants to sign a new tenancy agreement (which they may not be willing to do)
- It is more difficult for tenants to stop you entering the shared parts of the property – the tenants AST is just of their own room. They do not have ‘exclusive occupation’ of the rest of the property and therefore their rights to exclude you are less powerful.
- You can often get a higher rent for a property overall if you rent it out by the room
Negative points about renting rooms in a shared house
- Its more paperwork
- The utility accounts will need to be in your name and my understanding is that you will also be responsible for the Council Tax.
- If one tenant leaves, you will not get any rent for their room until it is re-let (unlike with joint and several agreements where tenants are liable for ALL the rent, not just their own share)
- If there is damage in the shared parts, it will be more difficult to prove who was liable and bring a claim against an individual tenant’s tenancy deposit
Renting out individual rooms is becoming more popular, particularly in the rent to rent sector.
It is particularly appropriate where the individual tenants do not know each other and will be staying in the property for different lengths of time.
Tenancy or license?
People often think that just because the occupier is renting only one room, it is not a proper tenancy. This is not the case. Most rents of single rooms (where the landlord is not resident) will automatically be tenancies and ASTs.
Landlords sometimes try to create licenses as they think this gives them the right to evict tenants with out going to court. This is NOT the case – and anyway even if the occupier does have a license,they will still be covered by the Protection from Eviction Act 1977.
Houses in Multiple Occupation (HMOs)
Sometimes people avoid renting out by the room as they think it will be more likely to turn the property into an HMO.
However the definition of an HMO is related to whether the sharers are members of the same family or household or not – the type of tenancy agreement they sign is irrelevant.
So if (for example) you are renting to five strangers, the property will automatically be an HMO and you cannot change this by getting them all to sign the same form.
However it is true to say that if you are renting by the room, the property will almost always be an HMO unless there are just two individual tenants or all the tenants happen to be related.
Where a property is an HMO, this will bring into play the HMO Management Regulations (in all cases), and some properties (although not all) will need to get an HMO license from the Local Authority.
Points about rooms in shared house tenancy agreements
- The agreement must state that it is for a room in a shared house, and identify the room concerned (this is generally done by giving it a number, eg Room 4, although you can also describe where it is, eg ‘first floor back bedroom’)
- The agreement must also set out the arrangements for payment of utilities. Many landlords let out this type of property on an all inclusive basis. In which case you need to protect your position if the bills are needlessly run up by tenants. (I have a special tenancy agreement type which deals with this situation.)
- You should not use a ‘bog standard’ AST for a whole property when renting a room in a shared house.
- Tenancy agreements for rooms in a shared house are less common but they ARE available. I have several.
Next time I will be looking at resident landlord agreements.
NB If you want to check what tenancy type is suitable for YOUR property visit my Which Tenancy Agreement Guide. All Landlord Law members can create unlimited tenancy agreements via our Document Generator service.