Should you rent property to family members?

Renting out a property to relatives may seem straightforward, but it still comes with the same legal and financial responsibilities as any tenancy. While it can offer peace of mind knowing your tenant personally, it can also create complications with mortgages, tax, and tenancy agreements. This guide explains the key points to consider before renting to family members.

Is it legal to rent a property to a family member?

Yes - it is legal to rent to family, but you must meet the same requirements as any landlord. This includes having the correct mortgage type, following tenancy laws, and paying tax on rental income.

Some buy-to-let lenders treat renting to family as a higher risk arrangement. They may apply stricter affordability checks or require a specific “regulated buy-to-let mortgage.” Always confirm your lender’s criteria before proceeding.

Although you may trust relatives more than other tenants, lenders are cautious because family arrangements can affect financial discipline - for example, charging below-market rent or being lenient with payments.

Can I charge my family member a lower rent?

Technically yes, but it may affect your mortgage and tax position.

Most lenders require landlords to charge rent at 125% or more of monthly mortgage costs to qualify for a buy-to-let mortgage. Offering discounted or free rent may breach this condition, so always check your loan agreement.

From a practical perspective, setting a lower rent can also complicate future adjustments and cause tension if rates rise. Keeping rent close to market value is usually best for both clarity and compliance.

Do I still need a Tenancy Agreement?

Yes. Even when renting to family, a written tenancy agreement is essential. It protects both parties by setting clear terms for:

• Rent amount and payment dates
• Deposit amount and return conditions
• Responsibilities for repairs, pets, and utilities

You should also complete an inventory of the property and protect the tenant’s deposit in a government-approved scheme (Deposit Protection Service, MyDeposits, or Tenancy Deposit Scheme).

Under the Tenant Fees Act 2019, landlords cannot charge for administration or referencing fees, so ensure your agreement complies with current legislation.

Do I need to reference a family member?

While tenant referencing is optional for family, it can still be beneficial - especially if the arrangement will be declared for tax or mortgage purposes. A basic credit check helps confirm affordability and maintains a professional standard.

You can rent to relatives who receive housing benefit or Universal Credit, provided you don’t live in the same property and a formal tenancy agreement is in place. If applicable, discuss what would happen if ownership changes or you pass away, as this could affect their right to stay.

Read: A landlord’s guide to Universal Credit

Do I have to pay tax on rent from family?

Yes. All landlords must pay income tax on rental income, minus allowable expenses such as maintenance and management fees.  In fact, there are a few different tax implications for landlords, so it’s best to read up on them here.

Looking to take the hassle out of letting?

At haart, we know you’re busy, so work to support you through our property management services, and in-branch advice. Get in touch with your local haart branch for a chat through your options as a landlord and how haart can help you.

Just getting started? See our top tips for landlords and check what your rights and responsibilities will be.