Subletting happens when an existing tenant lets all or part of their home to someone else. That person is known as a subtenant, and they have a tenancy for all or part of the property which is let to them. They also have exclusive use of the area that is let to them. This means that unlike a lodger, a subtenant can stop their landlord from entering their room.
This page looks at what you need to think about if you want to sublet part of your home and become a resident landlord.
If you're thinking about moving out and subletting all of your home, you should speak to an adviser first.
Most tenants need their landlord's permission before subletting part of their home.
If you get Housing Benefit (HB), the first £20 of weekly income from a subtenant is ignored and won't affect your benefit.
John sublets a room in his home and charges his subtenant £40 per week. £20 of this would be disregarded which means that the remaining £20 is treated as income when working out how much HB John would be entitled to each week.
If you're a working-age social housing tenant and you have one or more 'spare' bedrooms, you may be paying some money towards your rent already because your HB has been reduced. This is known as the 'under-occupancy charge', the 'social sector size criteria reduction', the 'removal of the spare room subsidy' or the 'bedroom tax'.
If you sublet a room, you'll be treated as needing a bedroom for the subtenant for HB purposes. This means that your HB won't be reduced because the bedroom is no longer 'spare', although the rent that you get from the subtenant counts as income, as explained above.
Things are different when you are on, or move onto, Universal Credit (UC).
For people on UC, the rent from a subtenant is not treated as income. This means that whatever amount you charge a subtenant, it will not impact on how much UC you get. However, working-age social housing tenants are subject to the size criteria reduction for the spare bedroom that the subtenant rents.
Rupa lives on her own in a two bed housing association flat with a rent of £100 per week. She gets permission from her landlord to sublet the spare bedroom and charges the new subtenant £45 a week.
The £45 weekly income doesn't affect Rupa's Universal Credit (UC). However, the size criteria reduction for the extra bedroom means that a 14 per cent reduction is applied to the ‘housing costs’ part of Rupa's UC. This amounts to a reduction of £14. Rupa can use some of the income from the subtenant to cover the £14 shortfall.
Any income from a subtenant may affect your entitlement to other benefits and tax credits. It may be best if you speak to an adviser first who can do a 'better-off calculation' for you. This is a calculation that would help you work out how any additional income would affect your entitlement to benefits or tax credits.
If you live alone and would like to sublet a spare room, you need to bear in mind that you will lose the 25 per cent single person discount on your council tax. There may be some exceptions, for example, if the subtenant is a full-time student.
If you're a taxpayer, the government's 'Rent a Room' scheme allows resident landlords to earn £7,500 each year tax free. More information is available on the GOV.UK website.
You can also earn up to £1,000 of other property-related income tax-free. This could include income from renting a parking space on your drive, or letting someone store items on your property for a fee. This £1,000 tax-free allowance is separate to the Rent a Room scheme, and cannot be added to any tax relief you may already receive from that scheme.
Renting out a room in your home can affect your home contents insurance. Your insurer may increase your premium, but if you want to be sure that your belongings are protected it's important to tell them. If you don't, your insurance policy may not be valid.
If you sublet part of your home under a tenancy agreement, you'll be responsible for the repair responsibilities that are set out in the Landlord and Tenant Act 1985. Generally, this means that you're responsible for keeping in repair:
You'll also have to make sure your home is ‘fit for human habitation’, which means it’s a safe and healthy place to live, without anything that could cause someone serious harm. You can find out more about how rented homes should be fit for human habitation on GOV.UK.
As a tenant yourself, your landlord should already be doing these things. So, for example, if a radiator in the subtenant's room stops working, you can report the problem to your landlord for them to fix. However, problems may start to arise if your landlord does not do the repair work.
You should make sure that your home is clean, in reasonable decorative order, and is free of any hazards and vermin.
Any furniture you provide must comply with fire safety regulations. So if you have any older furniture, you should check the labels to make sure that it is compliant.
The gas safety regulations also apply if you sublet part of your home. This means that gas appliances must be kept in good order and that an annual safety check is carried out by a recognised engineer.
As a tenant yourself, your landlord should already be doing this, in which case you don't need to do it again. If your landlord is not doing this, then you should contact them about it straightaway.
You also have to ensure that the electrical system and any electrical appliances you supply are all safe to use.
If you plan to sublet part of your home and become a resident landlord, you have to check the immigration status of the people you sublet your home to.
Checking that every tenant has a right to be in the country is a legal requirement for private landlords.
You’re responsible for doing the immigration check even if your landlord knows you’re subletting. You could get a fine of up to £3,000 for renting out a room without doing an immigration check. If you rent out a room to someone you know or suspect doesn’t have the right to rent, you could get an unlimited fine, or a 5-year prison sentence.
You can find out how to check your tenant's right to rent on GOV.UK.
Do you need to have a written agreement?
It's best if there is a written agreement so that the rights and responsibilities for each of you are clearly set out. You can get standard tenancy agreements from legal stationers which can be adapted to suit your needs.
It's also a good idea to draw up an inventory of the furniture and fittings provided to help prevent disputes about any deposit paid. It can be useful to take photographs to accompany the inventory to show the condition of everything.
Renting a room to a lodger under a licence agreement rather than to a subtenant under a tenancy agreement does have a few advantages. These are:
'Letting rooms in your home - a guide for resident landlords' - GOV.UK at www.gov.uk
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