Should you rent your property to family?
Renting out your property can be stressful and comes with a lot of responsibility, including finding good tenants.
So, for simplicity, it can be tempting to rent to family members.
However, there are complexities and renting to family member isn’t always as straightforward as you might think.
In this guide, we’ll highlight the rules around renting property to family and answer all your key questions around the subject…
Can I rent a property to a family member?
You can choose to rent your property to a family member if you wish.
However, you must have the right mortgage in place before you do, and you must follow all the rules on legally renting out property in the UK, including all legislation around tenant health and safety.
To find out more about the legislation you’ll need to comply with, read our guide on how to be a good landlord.
What is the law on renting to family members?
The main legal requirement when renting property to family members is that you have the correct mortgage in place.
And you must tell your lender that you’re planning to rent to a family member, as failure to do so may be considered mortgage fraud.
Most lenders will apply different lending criteria if you’re renting to a member of your family, while others may not be willing to lend to you at all.
This is because:
- A buy-to-let mortgage where the tenant is a family member of the landlord means more risk for the lender
- The lender may believe you would be more lenient with a family member as a tenant
- You may have problems evicting a family member or imposing rules
- The lender may believe you’ll charge a less-than-market-value rent, or a ‘mate rate’
Do I need a buy-to-let mortgage when renting to family?
If you want to rent out your property to family, you’ll need a buy-to-let mortgage.
You’ll also need to tell your lender that you plan to rent to someone in your immediate family if they are:
- Your sibling
- Your parent
- Your grandparent
- Your grandchild
- Your spouse or civil partner
- Cousins, uncles, aunts, nephews, and nieces don’t generally count as close family members, but you should always check with your mortgage lender before renting to more distant family members.
Can I rent a room to a family member?
When renting a room to a family member, that person would be classed as a lodger rather than a tenant – if you were also living in the property as a resident landlord.
Most lenders won’t require you to switch to a buy-to-let mortgage if renting out a room to a family lodger.
However, you should always check your lender’s policy on this before renting out your room.
Can you rent a house to a family member on benefits?
If you’re renting a property to a family member and you’re not living in the property as a resident landlord, the family member may still be able to claim housing-related benefits.
For your family member to claim housing benefits while renting from you, you must:
- Have a legally binding tenancy agreement in place
- Take on the rights and responsibilities as a landlord
- If you live in the same property as the family member you’re renting to, they won’t be able to claim housing benefits if you are:
- Their parent or step parent
- Their child or step child
- Their brother or sister, or half-sibling
- Their partner
Do I need landlord insurance if renting to family?
Even if you’re renting your property to a family member you trust, you should still have the correct landlord insurance policy in place.
Your mortgage lender will insist on a valid buildings insurance policy, and you should also consider other levels of cover such as:
- Contents insurance if your property is furnished
- Accidental damage insurance
- Tenant liability insurance
- Legal expenses insurance
- Boiler breakdown cover
Do I need a tenancy agreement when renting to family?
A tenancy agreement is an essential document for any rental property – whether you’re renting to a family member or someone from outside of your family.
The tenancy agreement sets out your rights and obligations as a landlord and those of your tenant, including how much rent is due each month and when it needs to be paid.
It should also outline notice periods and the tenancy’s fixed term length.
Do I need to take a deposit when renting to a family member?
Taking a tenancy deposit isn’t a legal requirement for landlords, but it’s highly recommended – even if you’re renting your property to someone in your family.
The deposit protects you against damage to your property or lost items at the end of the tenancy, as well rent arrears should your family member be unable to pay.
If you do take a deposit from your family member, you must:
Protect it in a government-approved tenancy deposit scheme within 30 days
Tell your family member where their money is protected within 30 days
Only charge a deposit of no more than five weeks’ rent if the annual rent doesn’t exceed £50,000 and no more than six weeks’ rent if it does exceed £50,000
Can I charge a reduced rent to a family member?
Charging a family member less rent than the market rate could cause a problem with your mortgage lender.
With any buy-to-let mortgage affordability test, most lenders will require your monthly rent to cover at least 125% of your monthly mortgage payment.
So, if you’re charging a family member less, this could impact the affordability of your mortgage.
Is renting to family considered income?
Rent paid by a family member would still be considered income, so you may need to pay income tax and national insurance on what you earn.
For more information on landlord taxes, take a look at our comprehensive guide.
Further reading…
Everything landlords need to know about legislation in 2022
