Renting a Property to Family and Friends: What Are the Rules?

Finding Tenants • 04 Mar 2026, 14:24

Renting a Property to Family and Friends: What Are the Rules?

Letting your property to family or friends can feel easy and reassuring, but it still comes with the same responsibilities and legal obligations as any standard tenancy.

Even when you’re renting to someone you know, doing things properly helps avoid problems later and keeps your friendship intact.

Below, you’ll find simple, practical tips for renting to family and friends, along with advice from landlords who’ve been there themselves.

Do you need a tenancy agreement?
You can skip referencing… unless you want rent insurance
Check your mortgage terms
Don’t forget about tax
Repairs, rules and regulations
OpenRent landlords offer tips for renting to family and friends

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Do you need a tenancy agreement?

It can be tempting to skip the paperwork when renting to someone you know. In reality, though, the law still applies, even if nothing has been written down.

If someone moves into a property and starts paying rent, a tenancy is likely created automatically. This can happen when an offer to rent the property is made and accepted, followed by a payment such as the first month’s rent. In other words, the tenancy exists whether or not there is a written contract.

When an oral agreement is formed, your friend or family will gain certain rights and protections. For example, if you want them to leave but they wish to stay (perhaps due to paying “mate’s rates” rent) you will still need to follow the formal eviction process (remember, Section 21 will be no more after April).

The same goes for other responsibilities. You will generally not be able to enter the property without permission, and you will remain legally responsible for carrying out necessary repairs.

Because these protections arise automatically, it’s usually best to put the agreement in writing. A clear tenancy agreement sets out the terms from the outset and helps both sides avoid confusion or disagreements later on.

You can skip referencing… unless you want rent insurance

When renting to a friend or family member, it may feel unnecessary to carry out the usual tenant referencing checks. After all, you probably already know the person well and may feel comfortable letting to them without reviewing their credit history or income.

However, skipping referencing will most likely limit your options later. Most rent guarantee insurance policies require tenants to pass a formal referencing process, or to have a guarantor who does. Without this, you will not be eligible for cover.

Although it might seem like extra administration, rent guarantee insurance can offer useful protection. If your friend or relative runs into financial difficulty and struggles to pay the rent, the policy may cover the payments. That can reduce financial pressure and help prevent an awkward situation from affecting your relationship.

Check your mortgage terms

Before renting to a friend or family member, it’s worth checking the terms of your mortgage. Some lenders place restrictions on who you can rent to, and letting to relatives or close friends may not always be allowed.

This is particularly common with standard residential mortgages, though certain buy-to-let mortgages can also include similar conditions. If your buildings or contents insurance was arranged through your lender, there may be rules about who is allowed to live in the property as well.

Taking a few minutes to review these documents can help you avoid problems later on, especially if you ever need to make an insurance claim or discuss the tenancy with your lender.

Don’t forget about tax

Even when you’re renting to family or friends, there are still tax rules to keep in mind. These arrangements (often called “non-commercial” or “uncommercial” lets) are treated differently by HMRC, so it’s worth understanding how it affects you.

If the property isn’t your main home, you’ll usually pay the Stamp Duty Land Tax (SDLT) surcharge when you buy it, even if your tenant is a relative or friend. You’ll also need to declare any rent you receive on your Self-Assessment and pay income tax just like you would for a normal tenant you’d find on OpenRent.

Charging below the market rate (“mates’ rates”) can also affect what costs you can claim. HMRC requires expenses to be incurred “wholly and exclusively” for business purposes, so if the rent is discounted, you can generally only claim expenses up to the rent you actually receive. You may be able to reduce your taxable profit to zero, but you usually can’t create a loss to offset other income or carry it forward.

If, at some point, you decide to sell the property, any profit may be subject to Capital Gains Tax (CGT).

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Repairs, rules and regulations

In theory, landlords who don’t follow rules and regulations face large fines. In reality, there is little active inspection of private properties in the UK, and landlords are rarely penalised unless a tenant reports them.

Even when renting to family or friends, it’s important not to skip your legal duties. Trusting tenants won’t automatically excuse you from following the rules, and keeping up with best practice protects both your property and your relationships.

To help landlords, we’ve created a checklist outlining all your legal duties. This resource helps ensure that no responsibilities are overlooked when renting out a property.

Every item on the checklist is important, but pay particular attention to safety regulations. Conducting electrical and gas safety tests is essential to ensure the property is safe for your tenants to enjoy as their home.

OpenRent landlords offer tips for renting to family and friends

We asked landlords in our OpenRent Community forum to share their experiences and insights about renting to family and friends, including both the positives and the challenges they’ve faced.

Nick

“If anything you’ll need to be a better landlord when renting to relatives and friends – by that I mean you need to be on top of all the paperwork and legal requirements and maintain the property – these are tenants not just mates!

You’ll need to consider if you can face evicting them if they stop paying rent or break the AST. How will being a Landlord affect your family and relationships? Do you want to risk family gatherings becoming landlord-tenant discussions? Do you want your Landlord decisions to be discussed and disagreed with by your other friends or relatives? In my experience of a family rental, when it goes bad it can be very damaging for family relationships.

The upside (or downside, depending upon the friend or relative) is that you already know how they live and whether they are reliable payers, but be prepared to see their worst side!”

David

“I rented to the ex of a friend at their request. The new partner acted as guarantor. It was a nightmare of unpaid rent, melted carpets due to fags and disgruntled commercial neighbours. This individual was eventually evicted and I recouped some funds from the guarantor which caused relationship issues for a while.

After eviction I got plagued by repeated requests to get back in, to the point I had to block the numbers etc. I should have known better and not tried to help out. The tenant concerned was the issue, not the fact I had a connection. My problem was trying to help out a friend and not being objective enough.

Lesson: Be business like, do be swayed by emotional links but only AFTER due diligence.”

Ultimately, when renting to people you know well, it’s still best to set up the tenancy properly, ensure the property is safe, and have clear, written agreements about your arrangements.

This approach will help prevent issues, keep your friends and family safe, and allow things to run smoothly if unexpected circumstances arise. The easiest way to achieve this is through our tenancy setup service, Rent Now.