Landlords can choose to generate rental income from a spare room in their main home or from a rented property. Even if both rental arrangements seem similar at the surface, they will be treated very differently in the eyes of the law. Whilst a lodger will rent a room in the landlord's home, a landlord will not live in the property rented by a tenant. This article explains the main differences between a lodger and a tenant to help you choose the right type of rental agreement.
Interest or permission to occupy?
At first glance, it may seem that a Lodger (legally known as a Licensee) and Tenant are the same: a person renting a property from a Landlord. However, in reality they are quite different and their obligations, responsibilities and rights differ, as do the agreements they enter into. A Licensee has fewer rights and will enter into a Licence Agreement and a Tenant will enter into a Tenancy Agreement - typically an Assured Shorthold Tenancy (AST) Agreement in England and Wales. You can view a tutorial of Legislate’s ASTs online.
The Tenancy Agreement grants the Tenant with a legal interest in land for a specific period of time, the Tenant will have control over the property for the duration of time specified in the Tenancy Agreement. Whereas a Licence grants permission for a person to occupy the property but does not confer a legal interest, in the absence of the Licence Agreement this person would be a trespasser.
For a person to be considered a Tenant and for the letting to be considered a Tenancy there are key elements that must be present. It is clear from the case of Street v Mountford that the essence of the Agreement determines whether a letting is a Tenancy (and not a Licence) rather than the label of the Agreement.
What makes a lodger different from a tenant?
A Tenant has the right to exclude others (including the Landlord) from entering the premises without permission. The premises can be an entire property or just a single room in the property.
The main difference is that a Lodger does not have exclusive possession and is considered an excluded occupier. This means that the Licensee does not have exclusive use of the property. An excluded occupier is someone who shares the property with the homeowner (the Landlord). If the Agreement allows unrestricted access to the room or property, this would be a Licence Agreement.
In addition, in a Tenancy the letting is for a specific room/property and the Tenant cannot be moved to a different room/property. In a Licence Agreement, the Lodger can be required to move to a different room within the property.
Agreed Period of Time
This can be for a fixed period of time or periodic based on the rental period (i.e. week to week or month to month).
A Lodger can be given ‘reasonable notice’ to leave the property and as mentioned above, the Landlord can require the lodger to move to another room within the property. The Landlord must give at least 2 months’ notice in order to repossess the property if you are a Tenant.
Although this is not an essential ingredient for a Tenancy Agreement, it is very common as most Landlords will require the Tenant to provide a form of payment in return.
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What are the main features of a Lodger Agreement?
The main features of a lodger agreement are:
- The resident landlord may enter the room without permission;
- The Lodger cannot keep the Landlord out;
- The Lodger has access the shared living space such as a kitchen, bathroom and living room
- The Landlord may request the Lodger to move to a different room in the property;
- The Landlord does not need to protect the deposit with a deposit protection scheme;
- The Landlord may provide the Lodger with house rules;
- The Landlord has fewer legal obligations, although the Landlord must make the property safe for occupation, the regulations are less stringent for a Lodger in comparison to a Tenant;
- The notice period for ending the lodger agreement is shorter and usually based on the rent payment frequency; and
- The Landlord only needs to give ‘reasonable notice’ for the Lodger to leave and they can evict the Lodger without a court order if ever they refuse to vacate their room.
What are the main features of a Tenancy Agreement?
The main features of a tenancy agreement are:
- The Tenant will have exclusive possession of the property;
- The Tenant will require notice for inspections or visits by the live-out Landlord;
- The Landlord must abide by safety regulations prescribed by law;
- The Landlord must protect the deposit with a tenancy deposit scheme;
- Landlords’ are legally required to provide tenants with all the necessary safety certifications at the beginning of the tenancy for electrical and gas appliances; and
- It is a legal requirement for the Landlord to give at least 2 months’ notice to repossess the property;
What are the benefits of creating a written agreement for your lodger or tenant?
Using a contract to rent a room ensures that the key contract terms are understood in writing by both parties. Whilst it might be tempting to label an Agreement a Licence due to the reduced obligations, it is important to understand that the written agreement must have the features of a Licence or risk being treated by the courts as a Tenancy. Equally, a landlord must understand the consents they need to give before letting out their rental property via a tenancy agreement.
How to create a lawyer-approved contract for your room on no legal budget?
Legislate enables Landlords to create lodger licence and assured shorthold tenancy agreements which are fair, robust and tailored to their situations. For only £9.95, you can customise a contract and sign it electronically. To find out how, sign up, watch our demo and tutorials or alternatively book a call with us.
The opinions on this page are for general information purposes only and do not constitute legal advice on which you should rely.