Deposits and lodgers
Taking in a lodger (and sharing your house with them) is very different to letting out a home you don’t live in. Taking in a lodger has fewer legal requirements than letting a whole property, but there are still things to consider – including deposits.
Here's our guide to everything you need to know about deposits if you have a lodger.
What is a deposit?
A deposit is essentially a sum of money paid to a landlord to cover any damage or unpaid rent. It’s usually paid before a lodger moves in, and should be returned to them when they leave.
Why should I take a deposit from my lodger?
The bonus of having a lodger is that you share the house with them, so it’s less likely they’ll cause significant damage to the property. However, there’s always a chance that a lodger will cause damage or fall behind on rent payments – which is why taking a deposit is a good idea.
Make sure you mention the deposit in your lodger agreement, and clearly outline the reasons you may take deductions from the deposit. SpareRoom has a prewritten, solicitor-approved Lodger Agreement you can buy here.
How much should I charge my lodger?
The typical deposit is usually a month’s rent, so your lodger would pay you a month up front, plus another month as a deposit. However, there are legal limits on what you can charge your lodger.
In England the deposit can't be more than 5 weeks' rent. This limit applies, as long the rent isn't more than £4,167 a month, which is incredibly unlikely if you’re taking in a lodger! Above that the limit is 6 weeks’ rent.
In Scotland the maximum is 2 months' rent. Wales doesn't have a limit.
How to calculate a deposit
Working out how much you can charge seems pretty simple on the face of it, but it's easy to get it wrong without meaning to. As SpareRoom doesn't let you set a limit higher than the legal maximum in your area, it'll save time to know how to do it properly.
If you charge weekly rent, then 5 weeks’ rent is just 5 x the rent. Simple. However, if you charge monthly rent then it's (only slightly) more complicated.
Here's how it works:
Monthly rent x 12 ÷ 52 x 5 = 5 weeks’ deposit
Rent x 12 gives you the annual rent, divide by 52 to get 1 weeks’ rent and times that by 5.
Do I need to use a deposit protection scheme if I have a lodger?
In short: no.
Some renters mistakenly think all deposits have to be protected, but the law doesn’t apply to people taking in lodgers. As a live-in landlord you have no legal obligations to use a deposit protection scheme. However, it’s good practice to keep the money in a separate account as you still have to return it to your lodger when they move out.
What happens when my lodger moves out?
When your lodger leaves, you should return the deposit. If you’re deducting anything from it, make sure you tell them how much and what each deduction is for. Try to be specific and give them a chance to come back to you in case they disagree with something. Most deposits disagreements can be resolved by referring to your Lodger Agreement, as this should have made everything clear before your lodger moved in.
It might be tempting to let your lodger use their deposit as the last month’s rent. We’d advise against it, simply because any damage in the final month, or when your lodger moves out (even if unintentional), has to be paid for by you.