Should You Rent Your Property To Friends & Family? If So, How?

Lockdown #2 update: You can still let/rent a home, buy/sell your home, and move home during the lockdown in England starting on Tuesday 5 January 2021 (unlike the first lockdown in March 2020). But you must follow Covid safety guidance.

Renting to friends & family

I’m not going to sit here on my rotund ass and drown you with my thoughts on whether renting out your property to friends or family is right or wrong. That’s ultimately your call! But God, I hope you’re not a wally, making a wally decision.

Similarly, I’m not going to drill into the pros and cons of mixing business with pleasure, because I’m going to give you the benefit of doubt and assume you’re not a teenager and common sense isn’t a foreign to you, which means you’ve heard the horror stories of how it can lead to the demise of lifelong relationships, and you’ve already taken that all into account.

But I will sit here [on my rotund ass] and tell you that many other landlords certainly do, while others, unsurprisingly, would rather wipe their ass with a hedgehog. But if it’s something you want to get on board with, then you should do it right.

Simply, this isn’t about whether you should or shouldn’t rent out your property to friends or family, this is about helping you do it properly if you decide to!

Table of contents:

Word of warning: proceed with caution!

While I personally would rent out my property to a family member or friend, I do want to make it clear that it’s not a blanket rule across the board, meaning that I would only do it under certain conditions. To be specific, it would depend on the relationship I have with the person(s).

For example, I would never consider the possibility if it involved a work colleague or my uncle John. However, I would definitely give my best-friend the greenlight, because we have that relationship which permits me to, quite literally, barge into the property and shout at him at the top of my voice if he proves to be a sinfully sloppy tenant. I know my actions won’t impact our relationship and I know he won’t take legal action against me for harassment. Above all, I know I can trust him with your life.

I’m not going to run through every scenario, but I do want to make the point that my position on renting my property to friends and family isn’t without prerequisites. My perverted uncle John will need to sniff up another tree.

In reality, there are only a tiny handful of people that would get a pass!

Can I rent out my property to my friends & family?

As in, are there any legal limitations or restrictions? Nope (at least, not in England or Wales, no idea about other countries). However, you should be aware of the following…

  1. Check your mortgage policy
    If you have a mortgage (*ahem* needless to say, it should be a BTL mortgage), it’s best to check the terms and conditions, because there might be a term which strictly prevents you from letting to friends or family.
  2. Check your insurance policy
    Similarly, check your BTL building/content insurance policy to check for any restrictions on renting out to friends and family. If you’re unsure, it’s best to contact them for confirmation.

Using the right tenancy agreement contract

As tempting as it might be to forge your arrangement with a verbal agreement and a spit-shake, I highly recommend fighting the urge and using a proper written tenancy agreement instead.

It’s important to note that even if you don’t have a written tenancy agreement, you will still be creating a legally binding tenancy as soon as the tenant (i.e. your friend or family member) moves into the property. That means you will both be protected by your statutory rights as landlord and tenant.

For example, your tenant will have the right to live in “quiet enjoyment“, which means, legally, you shouldn’t walk into the property without written permission, and if your friend suddenly stops paying rent, you will need to follow proper eviction procedures if they refuse to vacate. On the flipside, your tenant can’t decide to vacate the property without giving you proper notice, and if they do, they will still be liable to pay rent.

You may or may not take advantage of your statutory rights, but know that they are there.

With that said, since a legally binding contract will be created however you do it, it’s best to use a proper written tenancy agreement so everything is on paper and there is no confusion.

Tenant referencing friend or family member? Probably not necessary!

My presumption is that most landlords don’t bother referencing (i.e. check credit rating) their friends or family members.

I guess it depends on how well you know the person(s) in question.

However, circling back round to the point I made earlier; if it were me, I personally wouldn’t proceed if we are talking about someone that I feel I need to reference.

One point to bear in mind, however, is that if you want Rent Guarantor Insurance (i.e. an insurance policy which will give loss of rent in the event that your tenant falls into arrears), your most likely going to have to reference your tenant in order to qualify for a valid policy.

I know what you’re thinking, “my brother would never report me for breaching my landlord legal obligations”, and you know what? You’re probably right.

However, it does happen.

It’s happened to landlords that genuinely believed hell would freeze over before it would happen to them.

Regardless of who you’re renting your property out to, you need to always fulfil your legal obligations to protect yourself and your tenant. Absolutely zero exceptions!

Your legal obligations will include:

  • Regular electrical safety checks
  • Providing an energy performance certificate
  • Regular gas safety checks
  • Securing the tenancy deposit (if you take a deposit)

For more details, here’s a guide on landlord legal obligations.

Taking a tenancy deposit

This is another one that I’ll leave in the capable hands of your own discretion. Once again, I pray to God you’re not an absolute dummy.

Of course, the advantage of not taking one means you don’t need to faff around with the tenancy deposit legislation (e.g. securing the deposit into a scheme).

I would personally take a tenancy deposit. But that’s just me.

Routine property inspections

There’s a common misunderstanding about property inspections.

Most people assume it only serves one purpose; to check up on tenant’s and how they’re caring for your property. While that is the primary function of a routine inspection, it also provides an important opportunity to help identify issues that may not have been discovered by the tenant, and/or improve their living conditions.

For example, I have conducted property inspections in the past where I have identified worn carpets that were in dire need of replacing, not necessarily due to abuse. but more so years of wear and tear. So I have willingly offered to replace them. In another instance, I identified mould under the basin sink in the bathroom, which the tenant hadn’t noticed. So I arranged for the issue to get resolved ASAP before it escalated into a serious issue (which is often how mould issues escalate).

Friend or family… routine inspections shouldn’t be compromised.

In conclusion…

As I said from the beginning, it’s your call. I can’t make this decision for you.

If you take away anything from this blog post, I hope that it’s the encouragement to follow the proper and sensible procedures, and ultimately not to get too complacent because you’re dealing with a familiar face.

Best of luck!

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