Here is a question to the blog clinic fast track from Philip (not his real name), who is a landlord.
My wife and I now live as pensioner tax residents of France but work part-time and live in our UK house every two months or so for about two weeks.
We made lodger agreements with a couple and a single man in recent months. We have known them for some time before they moved in. Our intention is to keep our house so we can return, to provide local housing and to earn something towards keeping the house in the UK.
When we return to the house, we work, have guests, do some maintenance, cleaning and respect the lodger’s privacy. They pay a low price rent, and we pay all the utilities and council tax. I think it is a pretty good deal for them, and it allows me to stay at the house on a regular basis.
What I am not sure about is whether they are legally tenants or lodgers because of our moving between countries, and what the implications are of this. Is there any other arrangement whereby we can use the house and provide housing for others and offset some of my UK home expenses?
Would having only one lodger make any difference because of potential HMO implications- which the victorian terrace house does not come close to complying with?
Reading a previous blog entry, if they are lodgers, should I give back their deposits?
Then there is the whole question of what kind of insurance I need? Do I need a special landlord’s insurance rather than one through a high street brand which simply includes having lodgers?
Would be grateful for your perspectives, please, as I am uncertain about the validity of the current arrangement.
Answer:
Initial issues
First – you say ‘UK house’, but I am assuming that this is in England. There are different legal systems in Scotland and N Ireland, and the situation in Wales will be changing in December.
Assuming this, there are several initial questions here:
- Are you classed as a ‘resident landlord’ and
- Is this arrangement a tenancy or a license? Then
- Is the property an HMO, and if ‘yes’
- Is it licensable?
Are you classed as a ‘resident landlord’?
My view is that you are not.
If we look at the Housing Act 1988, this refers to resident landlords (of tenants) as being where they occupy another dwelling in the building as their ‘ only or principal home’.
From what you say, it looks as if you live in the property only twelve weeks or so of the year and for rest of the time live in France. I think we have to take it therefore that your principal home is the property in France.
It may be arguable that you can have two ‘principal homes’ particularly as one of them is abroad. However, this is a question I cannot answer – the only case law I could find was to do with tenants subletting rather than with a landlord’s periodic residence at the property with another property abroad.
If I am wrong and you can have two principal homes, then it may be possible for the occupiers to have lodger status. My view, though, is that you can only have one principal residence and that your UK house is not your principal home. You may want to take further advice on this point, though.
The rest of this post is on the basis that you are not a resident landlord.
Is the arrangement a tenancy or a license?
My feeling is that as your occupiers have their own rooms, and you say that you ‘respect their privacy’ (which presumably means that you do not go in there – allowing them ‘exclusive occupation’) they will be deemed to have a tenancy of a room in a shared house.
Under the case of Street v. Mountford ‘exclusive occupation’ is one of the hallmarks of a tenancy. But the tenancy does not have to be of the whole property. It is perfectly possible to have a tenancy of one room with shared access to communal areas. So they will share the ‘common parts’ of the property with the other occupier/s and also with you.
I am assuming that the other occupiers took on the property on the understanding that you would be staying there for several weeks a year. In which case, they cannot object to you staying at the property during your time in England and doing all the things you mention.
However, as (in my opinion) this will not be your only or principal home, my view is that the other occupiers will have an assured shorthold tenancy of their room, and shared use of the common parts of the rest of the property in common with you and the other occupier/s.
Is the property an HMO?
An HMO is created where you have three or more occupiers (which can be either tenants or licensees) living in a property where they share basic amenities and form two or more ‘households’.
A household basically means ‘family’. So in your property, there will be three households
- Yourselves
- The couple, and
- The single man
I think this must mean that the property will be an HMO, so you will be responsible for complying with the HMO Management Regulations.
Note that even if you were living in the property full time and the occupiers were lodgers, the property would still be an HMO as lodger landlords can only have two non-family members living at the property before an HMO is created. For more information, see here.
If you were to reduce the number of occupiers to one, then this would make it less likely that your property would be an HMO – depending on the view the Local Authority took of your periodic residence and if this counted towards HMO occupation.
However, if your occupation was taken into account, then it would be at least three occupiers in two households – making it technically an HMO. Although perhaps not a licensable one.
Is the HMO licensable?
Mandatory licensing applies to all HMOs where there are five or more occupiers forming two or more households.
In your case, there will only be five occupiers when you are in residence, but as you can go and live at the property whenever you want, the property may be treated as subject to mandatory licensing – depending on the view the Local Authority take of your occupation. [See the comment on this below from Alan, who works at a LA]
So at present, I think the property is at risk of being classed as a licensable HMO. Which would have several undesirable consequences
- You will be vulnerable to penalty charges or prosecution for failure to obtain a license, and
- Your tenants would be able to apply for a Rent Repayment Order.
Note by the way that some Local Authorities have imposed additional or selective licensing for all or part of their borough – so landlords always need to check with their Local Authority to see what the situation is in their area.
Some other issues and thoughts
Deposits
You ask about lodgers and deposits. You can take a deposit from a lodger, but it does not need to be protected. See here.
However, if, as I suspect, the occupiers are tenants and assured shorthold tenants, then you are in breach of the tenancy deposit rules.
If you are still within 30 days of payment of the deposit to you, I suggest you consider protecting them pronto. Otherwise, you will not be able to use the section 21 ground for possession unless the money is refunded to them (and you are able to prove this).
Insurance
You will need to explain the situation in full to your insurers and see what they recommend (keep a record of your discussion with them).
This could be another route to taking advice!
But it is important that landlords are totally up front with insurers about the occupiers living at the property, otherwise, your insurer may have the right to refuse to accept claims.
Other arrangements
My feeling is that you would be best to grasp the nettle of accepting that these are tenancies, and ideally work to make ‘their’ part of the property fully self-contained. If you and the occupiers are not sharing amenities such as kitchen, and bathrooms, then the HMO situation will not arise.
Although you will still need to check if your Local Authority has imposed selective licensing.
The tenancies would either be assured shorthold tenancies or (if it was accepted that you are a resident landlord despite your French home and only living there a few weeks of the year) common law / unregulated tenancies.
You could perhaps give the occupiers a lower rent on the basis that they keep an eye on ‘your’ part of the house while you are away.
On a practical level, it might be possible to separate out ‘their’ part of the property and make it self-contained by having locked doors between the two ‘parts’, which can then be unlocked if you want to live in the property as one residence again (I once stayed at a (very posh) holiday appartment with a resident landlord where this could be done).
However, you would need to have separate bathrooms and kitchens in the tenanted areas so they can be truly self-contained. This may not be possible for your particular house, depending on its size and configuration.
The other type of arrangement that I can think of is where occupiers are treated as ‘property guardians’. This is where people have a reduced rent on the basis that they are living at a property as caretakers.
Although my understanding is that this is normally done where the premises are commercial rather than the landlord’s own home.
Property guardian arrangements though not easy to set up (and you would need to get your agreements drafted by solicitors) and property guardian situations can still be HMOs.
And finally
I am sorry that I have probably come to the ‘wrong answer’ from your point of view and have thrown up legal issues which may make what I can see is, in principle, a sensible way of dealing with your situation, unviable.
Unfortunately, the HMO rules do not work well with lodger situations and make many seemingly sensible arrangements uneconomic due to the extra expense of complying with the HMO regulations.
As I say above, in my view, probably the best thing would be for you to divide the house into self-contained parts which you can rent out as a separate tenancy. But this may not be possible for your particular house or be something you want to do.
Readers may have other suggestions for you – in which case, please put them in the comments box below.
If the owner is not in residence (because of France) and so the tenants are not lodgers, then for HMO legislation the owner is not counted towards the number of occupiers, as the Law states a person must be using the property as their only or main residence.
So for that reason it is unlikely to require a Mandatory Licence.
Additional and Selective Licencing would still apply.
Thanks Alan, that’s very helpful.
To clarify Alan’s comment would that mean that for licensing purposes the owners would effectively be treated as if they were non-paying guests of the tenants, staying briefly in empty rooms?
But could the Mandatory HMO Licence requirements be triggered if, say, unknown to the owners, the tenants between them periodically let out the empty rooms on AirBnB?
The landlords would not be treated as guests of the tenants as the tenants would only have a tenancy of their own rooms and the common areas. The landlords could keep ‘their’ rooms closed up when they were not there. Ideally the agreements should specify that the tenants do not have access to the landlords rooms.
As regards subletting on Airbnb, the would presumably be in breach of contract and would entitle the landlords to evict the tenants and/or obtain an injunction against them. The fact that their actions could trigger HMO licensing would be a reason for the Judge to find in favour of the landlords in such a case.
I think it is more straightforward than that, the landlord would not be counted at all with regards to how many people are living in the HMO, as if a ghost in his own house.