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Grandlords are the new entrants to the rental markets

‘Grandlords’ are the new entrants to the rental markets Not many years ago, people assumed that retirement would bring a rest from worry, work and (hopefully) financial woes. That now appears to be nothing more than a dream for many, and one in seven pensioners is considering taking in a lodger to help pay the bills. And so another new word has emerged into our language - ‘Grandlords’: those who are in retirement and using their homes as a source of additional income.

It is a sad fact that nearly half of retirees are struggling to live off their pension and up to 15% of retired homeowners are looking to rent out a room to boost their income. The biggest move towards this trend has been seen in London with 20% of homeowners saying they felt they had no choice but to rent out a room.

A recent survey showed that more than half of the people questioned did not understand their responsibilities when becoming a landlord, or the type of insurance they would require. There are sorts of legal obligations which must be considered when letting out a room: for example, there are income tax implications for landlords. Under the government scheme of ‘Rent a Room’ you can earn up to £4,250 a year tax-free by letting out a room, which equates to a total of £354 a month in rent. If you exceed that you must fill out a self-assessment tax form and pay income tax.

In terms of insurance, having a lodger can particularly affect your contents insurance should you ever have to make a claim, so be careful with this. Here we offer a little check list of things you need to consider before attaining the title of ‘Grandlord’!

  • Home insurance companies have differing policies regarding lodgers. If you are seriously thinking about letting a room, contact your insurer to tell them of your circumstances and to check you have the right cover in place.
  • Thoroughly check out prospective lodgers before you offer them the room. Check their current employment status and how long they intend to rent for. At the first meeting (which you should handle as though it were an interview), have a form to hand as a ‘Lodger Application Form’ so that you can gather information such as employment details, bank details, NI number, next of kin etc. If the prospective lodger hesitates to complete these, let the alarm bells start ringing!
  • For very little cost you can run various professional checks on each of your lodgers, including a credit reference with a recommended rent checker service so that you can check they are of good character and can pay their rent.
  • Make sure your lodger signs a form contract or Lodger Agreement when they move in covering the main points of the agreement – and make sure you take an inventory to avoid any disputes later on.
  • When you have found your ideal lodger, ensure you familiarise yourself with their rights regarding the property – you can find these on reputable websites or through specialist companies.
  • Make the house rules clear from the outset. Create a little ‘starter pack’ for the prospective lodger which lets them know where they can and cannot go in the house, expected behaviour and responsibilities, appliance information, local information and emergency information.

Sharing your home with a complete stranger is always a daunting prospect, although some welcome the company. The main thing is to make sure you are at ease with the person you are welcoming under your roof and to make sure you are protected legally. If you have any concerns regarding insurance, just pick up the phone to our friendly and professional team at Westhill Insurance Services. We will be delighted to offer practical advice and help with your insurance concerns and will make sure you receive polite and helpful guidance. That way you can ensure you enjoy your role as Grandlord knowing that your property is protected and, from the insurance perspective, that you are operating within sensible guidelines.

(Note: This article assumes that the property has no mortgage, if there is a mortgage in place, be sure to call your mortgage company to ensure they are aware you are letting a room as this may affect the terms and conditions of your mortgage agreement)

Contact Westhill Insurance Services, today.

Posted By Ryan Jennings on 21st March, 2014