The key terms of a lodger agreement and how lodgers are classified.

How are lodgers classified?

A Lodger Agreement is a contract which grants a licence to occupy part of a residential property. The licence gives permission to someone (the “lodger” or “licensee”) to rent out a room in the property someone else (the “licensor”) is living in for an agreed fee. It is the preferred arrangement between parties who want to let part of a shared property, but do not want to take on the official responsibilities that come with the legal status of landlord and tenant.

A Lodger Agreement will establish the terms under which the licence is being granted and the duties undertaken by each party. This will include what the lodger must do and refrain from doing during the term of the licence. It will also include the licensors’ responsibilities and their entitlements under the Agreement. 

What are the rights and obligations of a Lodger Agreement?

Under a Lodger Agreement, the licensor (who may colloquially be called “landlord”, although they are technically not one) retains control and possession of both the room rented out to the lodger and the rest of the property. This means that the licensor can lawfully enter the lodger’s room at any time they want without permission, and the lodger does not have the right to exclude them. This is ultimately the core difference between a licence to occupy and a tenancy, the former does not grant a party the right to exclusive possession of even one room in the property.

A licensor’s right to enter the lodger’s room is not something they are likely to exercise in vain (i.e. for the sake of it), but rather in the performance of some kind of service. This could be to clean the room, change the beddings, clear the bins, water the plants, provide meals etc. What matters is that the licensor can enter the room without restrictions, even if the lodger has not agreed to specific times of the day when they can come into the room. 

What is the term of a Lodger Agreement?

A Lodger Agreement can grant a licence to occupy for a fixed term (an agreed commencement and termination date) or periodically (only an agreed commencement date). If a licence is periodic, this means that it will run from one set period of time to the next, such as from month to month, until one of the parties gives notice to terminate it. Note that if a Lodger Agreement does not address how long the licence is meant to last, the licence automatically becomes periodic. 

In England and Wales, a lodger is categorised as an “excluded occupier”. This means that they have limited rights to remain in a house, and are not offered the protection from evictions offered to tenants under X act. This does not mean that lodgers can be kicked out at random, though, they are still entitled to “reasonable notice” before being asked to move out from the property. Notice to terminate a Lodger Agreement is usually reasonable if it is at least as long as the rental period i.e. the time between rent (licence fee) due dates. So if the lodger pays rent fortnightly, they should be given at least a fortnight’s notice to leave the property. If the lodger does not leave by then, they will then be a trespasser and the police can be involved. However, a licensor must not attempt to forcibly evict a lodger by themselves. 

In Scotland, a lodger is classified as having a “common law tenancy”. This means that all lodgers must be given at least 4 weeks’ notice to leave the property. If they do not leave by then, the licensor needs to apply for a possession order from the First-tier Tribunal (Housing and Property Chamber).

What is a licence fee?

The Lodger Agreement will specify the licence fee (rent) payable by the lodger and how often it should be paid. Note that if the rent will be paid weekly, then the licensor must give the lodger a rent book. The Agreement may also have a rent review clause which specifies when and how rent will be increased. If it does not have such a clause, and the licensor wants to increase rent, they will need to get the lodger’s agreement.

A licensor can ask the lodger to pay a holding deposit at the start of the licence in order to cover any damage they cause or rent which is unpaid. This deposit will not need to be held in a government-approved tenancy deposit protection scheme, so it is important for the Lodger Agreement to specify the situations where sums from the deposit will be withheld and how soon after the end of the Agreement will it be returned to the lodger.

A Lodger Agreement will acknowledge the licensor’s responsibility to carry out repairs in the property. However, a lodger will usually be responsible for fixing or paying for the repairing of damages that they have caused.

Do I have to pay council tax for a lodger?

Council tax is an annual fee which is calculated for a domestic property and is the occupier's responsibility to pay. Single occupiers can claim a council tax discount but it might be removed if a lodger is taken on for an indefinite period of time and the room becomes their main home.