Letting your rental property to a family member in need could seem like a win-win situation.
You get the certainty of regular payments from a trusted tenant, while they get the security of a place to live with a landlord they trust. What else is there to consider? While this may have the potential to work well for both parties, it is still important to approach the arrangement with a business mindset in order to protect both parties.
Protect your business
Whilst a casual approach may seem like a good idea, considering you’re dealing with someone you know and trust, this could lead to significant problems down the line that no landlord wants to find themselves facing, such as financial hardship, legal disputes and damage to family relationships.
To avoid this from happening, and to protect your business, you should approach the arrangement as you would with a non-family tenant, ensuring you follow the right processes and have the correct documentation in place.
Navigating financial and legal complexities
Mortgage and insurance
You’ll need to have a buy-to-let mortgage to rent out to a family member, rather than a standard residential mortgage. Most residential mortgages prohibit renting to family and failing to disclose this information could be considered mortgage fraud. If you aren’t sure what type of mortgage you currently have, get in touch with your mortgage adviser or lender.
Likewise, it’s crucial to have dedicated landlord insurance in place rather than standard home insurance, as this will not cover you for a rental arrangement.
Tenancy agreement
We mentioned earlier the importance of following the correct processes still, and this includes having a written tenancy agreement in place that outlines the following:
● Names of all parties
● Start and end dates of the tenancy
● Rent amount and payment schedule
● Details of who is responsible for utilities and other bills
● Obligations for property maintenance and repairs
● Rules regarding pets, guests, and other common tenancy terms
● Procedures for dispute resolution and a clear outline of the notice period
Deposits and tenant referencing
Even though you’re renting to a family member, who is most likely someone you trust, it’s still important to take a security deposit from them and protect it in a government-back scheme, as required by law. This way, you’re financially safeguarding yourself from any unforeseen circumstances, such as damage to the property.
We’d also recommend carrying out a tenant reference and credit check, again to protect yourself, as poor credit history could indicate future financial issues.
Maintaining the balance
Striking a balance between wearing your family and landlord hats is crucial when renting to relatives. For starters, it’s essential to have a clear, open conversation at the start to establish boundaries and expectations. While it may feel awkward, discussing potential issues such as late rent or property damage upfront can prevent misunderstandings later on.
To keep the relationship from becoming strained, it’s wise to use professional communication channels for any property-related matters, keeping them separate from family discussions. The key to navigating these situations is to create a formal, well-documented process. Adhering strictly to the terms of a tenancy agreement – even in difficult situations – is the best way to ensure the arrangement remains solely transactional, protecting both the landlord and the family member from potential disputes.
Renting to a family member can be a rewarding experience when approached with care and professionalism. While it offers a unique blend of trust and convenience, it’s crucial to remember that a tenancy is a business arrangement first and foremost.
By putting the appropriate financial, legal, and financial protections in place, you’re building a solid foundation for a successful relationship. Maintaining open, business-like communication will help you navigate any challenges that arise, ensuring the arrangement doesn’t strain your family bond. Ultimately, by treating your family member as a valued tenant, you’re taking the best steps to protect both your property and your relationship.
If your rental property is based in the North West or Midlands, speak to property management company hapi.space for more information – Get in touch
