Any property owner who has a mortgage or is not a freeholder will need to secure the necessary permissions before they rent their property.
Inform the freeholder – If you are a leaseholder then your lease or contract will contain a clause that you must get the freeholder’s permission to sub let or part with possession. This permission may not be unreasonably withheld, but it is very important that you get the permission. If you let the property out and then later seek permission you will have already breached your lease. This breach is what we call a ‘once and for all’ breach and your freeholder can take legal proceedings against you.
The freeholder’s permission will generally be a formality, although it is usual for the freeholder to make a small charge for granting their permission. Refusal will only be given where it is reasonable. For instance, if there have been complaints about noise from former tenants this might be discussed and you might be required to satisfy the freeholder that you will be renting to responsible tenants. If the freeholder does refuse permission you should make sure you have read the lease and know what it says about this, and then seek the freeholder’s reasons for his refusal. You may be able to satisfy his misgivings before you need to take further advice.
Informing the mortgage lender – If you have a mortgage it will be a term of that agreement that you get the lender’s permission before you let the property, even if you are just letting one room in it. This is because the mortgage lender will be concerned that you are not doing anything that may affect the value of their investment and their ability to recover the loan they paid you to buy the property.
You will need to check the terms of your mortgage. For many Buy to Let mortgages permission to rent the property may be automatic, but even in Buy to Let mortgages there may be conditions on the type of let permissible e.g. ‘assured shorthold tenancies only’ [See here for an explanation of assured shorthold tenancy] or a restriction on Housing Benefit tenants. If you are unsure of the requirements, speak to your legal adviser assisting with the purchase. You will probably need special permission from the lender if you want to rent the property out as ‘rooms’ or bedsits which would create a House in Multiple Occupation. If you purchase the property as an owner-occupier on a standard mortgage for home owners, you will need to obtain permission to rent the property to tenants. The lender may increase the cost of the mortgage if they give permission to rent the property out.
Usually a lender will not object to one room being rented out to a ‘lodger’.