Many of us have lived in a shared house at some point in our lives. It’s a quick and easy way to find somewhere to live and at the same time can be a great way to make new friends in an unfamiliar city, town or area.

Other people choose to live with their best mates and have a ball and save money in the process; shared homes are usually one of the cheapest ways to rent.

And there are dating-style rental apps available on iTunes and Play that help strangers to club together and rent properties. Examples include Spareroom and IdealFlatMate.

This is how a shared house usually works. A group of people get together to rent a property and, although they all have separate bedrooms, share common facilities (sometimes annoyingly) including the kitchen, lounge, bathrooms and the garden, if there is one.

But beware; tenants renting within a shared flat or house sign a different type of tenancy contract to a single person or family renting an entire property.

Shared renting contracts fall into two categories and it’s important to understand the difference between them before you sign a contract; otherwise it can get expensive later on.

Joint tenancies

When moving into a shared house, tenants are asked by a landlord to sign a joint tenancy. The agreement will name all the tenants renting within the property and each one will be asked to sign the contract before moving in.

The important part is that as a group, the tenants have a ‘joint and several’ responsibility to pay the rent. This is a piece of legal jargon which in practice means that if one of the sharers moves out or disappears, the remaining tenants will be responsible for paying their rent.

Responsibility

Many tenants don’t understand this when they sign. If one of the people named in the contract decides to move back home or set up home elsewhere then the others within the house are responsible for finding a new tenant to replace them, and must pay the shortfall in the rent until a new flat or housemate has been found.

Deposits

Deposits are treated differently in joint tenancies as well. All the tenants individually pay a rental deposit, which must by law be lodged with a recognised deposit protection scheme, but the money is not ringfenced. For example, if one of the other tenants breaks something the cost of replacing it can be taken from everyone’s deposit, not just the person involved.

Moving out

Joint tenancies have other risks. One is that if - for example - five people are renting a house and three decide they want to move out, the other two will either have to move out too or find three replacements at short notice, which isn’t always easy or possible.

But a joint tenancy offers one big advantage. It means the tenants involved can set their own room rates within a property. For example, someone renting the largest room will agree to pay the highest rent and the person renting the box room pays the lowest.

Separate Tenancies

But joint tenancies aren’t the only way to rent as a group of friends. You can ask to each sign a separate contract with your landlord.

This usually means that although it’s a shared house, each tenant is responsible only for their rent. This kind of agreement is not popular with landlords because they don’t like chasing each tenant for rent, but they are better for tenants. If a house mate doesn’t pay their rent, it’s the landlord’s problem, not yours.

Separate tenancies are also used in Houses of Multiple Occupation (HMO). This is when a property is let out to individual tenants who rent separately but who share facilities. They are also sometimes called bedsits. What makes it an HMO is that the tenants don’t know each other before they move in and are therefore not a 'household'. They just rent a room.

But be careful when signing seperate tenancies; if it is an HMO then the property must feature more fire and safety items (such as fire escape stairs) than a normal shared home. There are several definitions of what an HMO is in England, which are defined by the government, and often they must be licenced. Check here if you know it's address.

Tenancy in common

This is not a way of renting but instead a way of owning a property. But many people wrongly think it’s a different way of saying ‘joint tenancy’. But it’s not.

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If you want to improve your credit position by reporting your rent payments, CreditLadder is the only way to improve your credit score and position across all four of the main Credit Reference Agencies in the UK, namely Experian, Equifax, TransUnion and Crediva. Building up a high credit score has a lot of benefits, including helping you access finance at better rates - this can also help save you money.

CreditLadder also runs a free mortgage application service in partnership with Tembo which will tell you how much you could borrow.

Remember the information provided in this article is for information purposes only and should not be considered as advice.