Check out Amazon and buy yourself a copy of Which Essential Guides 'Renting and Letting' by Kate Faulkner, it will help with your questions.

Would also suggest that you take Woolwell's advice and speak to the council responsible for the area you are going to use. Your local CAB is another place to seek advice on this matter, well before you go ahead with any ideas. I don't know if it still applies, but there use to be incentives given by council's and other government bodies for having 'lodgers'.

Friends or not, having lodgers means you must comply with the relevant fire regulations.

Remember that lodgers have few rights under the law. Most are classed as licensees rather than tenants, and their legal status is that of ‘excluded occupier’, because they are outside the protection normally given to tenants.

If you want a lodger to leave, for example, it's only necessary to give 'reasonable notice', which can be as little as a week, depending on the payment intervals applying. The government will allow you to earn up to £4250 a year tax-free from renting rooms, by the way.

make sure you get your lodgers to sign an agreement. This should include details of the rent, when it is due for payment, and how much notice you must give of any increase. Also include details of the period required for notice to terminate the agreement.

Outline the house rules, which areas are for common use, and which are not - gardens, for instance. Include information about visitors - when they can be invited, and whether they can stay overnight, use the shared facilities etc. (this can be a real problem area, so make sure you get it in writing).

Include information about any additional costs - utility bill sharing for instance, or access to broadband.

Say whether or not pets will be allowed.

Put more in rather than less if you are in doubt. It's far better in the long run if both parties know exactly where they stand. Friends can rapidly turn nasty when things go wrong.