Halifax Home Insurance commissioned researchers to compare data from the government's Survey of English Housing (SEH) with an anonymous poll of homeowners. The official statistics suggest that lodger numbers have reached 156,000, while the homeowner poll puts the figure at 970,000.
The research, part of the insurer's Peace of Mind campaign, suggests that financial concerns are fuelling the lodger boom and that new landlords keep tenants ‘under the radar' because they are worried about the tax implications. In fact, letting a spare room is tax free under the government's ‘Rent a Room' scheme.
Around 200,000 homeowners have taken on a lodger since 2006 and more than half (55 per cent) of new landlords did so for financial reasons, with close to one in five (17 per cent) saying they were unable to pay the mortgage without assistance.
Yet with three-quarters (74 per cent) of new landlords failing to carry out any background checks the insurer is warning homeowners to avoid ‘unofficial' arrangements with lodgers. This means drawing up a written agreement on payment terms, notice periods and conduct prior to a tenant moving in.
The implications of a casual approach can be serious. Rogue lodgers caused £136 million worth of damage last year as a result of criminal behaviour or severe neglect of the property, with one in four (27 per cent) landlords affected.
Serious reports recorded in the study include violent or intimidating behaviour and causing criminal damage. A significant one in seven (14 per cent) also say that a tenant has absconded without settling rental arrears.
Commenting on the findings, Martyn Foulds, senior claims manager at Halifax Home Insurance said: "Getting a lodger in is a great way to earn some extra money to help with the household budget, but it's important to seek advice from your home insurer beforehand, as this can often impact on the terms of your cover, and failure to let your insurer know of your changed circumstances could potentially invalidate a future claim.
Also, remember your lodger's possessions won't usually be covered under your home contents policy, so they will need to obtain their own home contents cover. It's also really important to seek reliable references for the person, and ensure that binding legal agreements are in place, so that all parties know where they stand."
For advice, including an interactive guide on how to interview your lodger before they move in, visit www.halifaxhomematters.co.uk.
