Why is it that landlords often find renting to family members and friends more troublesome than when renting to strangers? In this guide, experienced landlord and founder of LandlordZONE, Tom Entwistle, explains the rules on renting to family members in the UK, and how to avoid the common pitfalls.
You need to understand that when letting a property, the landlord-tenant relationship is, or should be, and indeed must be, a business relationship. Otherwise it won't work well.
The arrangement only works well when boundaries are set and expectations between the parties are clearly established: a tenant can expect that you will keep your end of the contract as long as they keep theirs, but they should always expect that you will do this in a professional and businesslike manner.
If you inherit a property or move to a different area and find yourself with a vacant property, you might think it's a good idea to let it in the short term. And you might think it would be more convenient to let it out to someone you know.
At first sight it might seem like a great idea to rent your property to family or friends who you know well and feel you can trust implicitly. This also saves a whole load of hassle marketing the property and going through all the strict formalities the process of finding tenants comes with. You would think your relatives or friends will pay their rent on time and take care of your property as you would yourself, so what could possibly go wrong? The answer is lots!
Letting to someone who wants to share your home – a lodger – is an entirely different thing to letting out a house or flat. Lodgers or live-in tenants have few rights under the housing acts, so they can be removed relatively easily if things go wrong, whereas tenants who have full occupancy of the property cannot.
So, when a friend or relative asks you a favour - perhaps you’ve told them in conversation that you have an empty property – and says that they would like to rent your property, or enquires for a friend or relative of theirs, you may feel a strong sense of obligation to go ahead.
You may well want to help them out if you can, but then you may reflect on how this might affect your relationship or friendship if things should go wrong. If you have any experience of letting properties, you know that the landlord-tenant relationship does not always go smoothly.
Renting property to strangers can be stressful, so it might be tempting to think that renting to family members or friends will guarantee that you have a positive relationship with your tenants. Be warned - ironically this is often so far from the truth, it's hard to imagine what troubles can ensue.
Could you face having to evict them if they stop paying rent, break your trust and the terms of the letting agreement? How long will they want to stay and how will it affect your family and relationships? For example, if there’s a falling out how will this affect wider family relationships? People talk when they are aggrieved.
People don’t always behave as you expect them to, even friends and family: if they turn out not to respect your property, damage furniture, burn and soil carpets, upset neighbours or fail to pay the rent, then it becomes very difficult to deal with when it is so personal between you.
I’ve been told by some leaving tenants that they have appreciated having a good landlord, while at other times I’ve sensed an underlying resentment at having paid rent - sometimes many thousands of pounds over months or even years. The joy of finding a nice rental in the first place can turn sour after months or years, when they have little or nothing to show for it – it’s the way of the world in landlording I’m afraid. These are the best cases, but when you get a non-paying tenant or there is damage and anti-social behaviour, relationships can get really bad.
So the request to rent to a friend or relative puts you on the spot. How do you respond? Should you let to friends and family? Well, my suggestion is, you explain that this would have to be put on a business footing, that a contract would have to be signed and that if the tenancy involves young friends or relatives, a guarantor may be needed.
This may sound harsh. It may offend your friend or relative at first, but it’s far better to ruffle a few feathers at the outset than having a major fall-out later on.
Another option you might consider is to take a step back: explain to your friend or relative that you use a letting agent to let and manage your properties. The agent will step in between you, putting the arrangement on a proper professional footing and keeping you out of any entanglement – the agent will take any flack.
It is always best to consider taking a deposit which can be protected and will offer some cover for loss of rent or damage if the tenant breaks any terms of the agreement. Tenants who pay deposits generally understand that this money will be refunded to them if they pay their rent and look after the property, returning it in the same condition. Using an agent who can take care of this for you may save you heartache down the line.
“Whoever your tenant is, things happen along the way. They should understand that they are signing up to a contract, and all that it includes. A security deposit can underpin this principle and will protect your interests in some way, either for damage or rent. A friend or family member is no exception.”
Suzy Hershman, Resolution department lead, mydeposits
I remember on a couple of occasions, when it slipped out in conversation that we had a flat vacancy, I was asked by a friend about letting it to one of their friends. In one case it was a business associate. As it turned out, I treated these tenancies as I would any other. I have my usual letting routine with inventory, basic checks, a good tenancy agreement etc., and both of these tenancies went well.
But this outcome is far from common with friends and family tenancies. There’s a big temptation to cut corners when letting in these circumstances - to offer favours, to reduce the rent, to waive the deposit, or even let casually without signing an agreement.
When I was involved in running LandlordZONE, in the early days, we would take calls from landlords and owners who wanted advice when they were having problems with their tenants. A good proportion of these problems were after having let their property to friends and family. Many calls were from people who were inexperienced at letting a property - they were simply owners of an empty property and they would let it on a very casual basis to friends or family with no agreement in place.
One case in particular I remember because I felt very sorry for the owner, who was distressed on the phone. Her own property was on the market for sale, and she had moved out. While the sale was going through her boss, who was aware of the situation, asked her if she would let her property to his daughter until the sale went through.
The owner thought little of this and agreed to the arrangement, casually allowing her boss’s daughter to stay in the house - a rather large four bedroom property, if I remember correctly, basically taking her and her father at their word.
The problem she had was firstly, there was no agreement in place. Secondly, the sale was due for completion within days. Thirdly, the boss’s daughter was refusing to move out, and fourthly, her boss washed his hands of her problem – told her the matter was between his daughter and her.
Entering into this sort of arrangement, on such a trusting and casual basis, simply helping a “friend” out, is all well and good if the person is trustworthy. If not, as in this case, the distressed owner was in real trouble. The sale would have to be delayed for months, and would likely fall through. A legal tenancy had been created, however casually it was set-up, so without a written agreement and with the tenant refusing to leave, the only way to evict was through a court hearing – a process that would invariably take months
I did feel sorry for this distressed owner who had, without much knowledge and a great deal of trust, allowed someone to occupy her property, creating a legal tenancy. This was not the only instance I can recall but the one I remember the most. There were many others involving friends and relatives. Talk about learning the hard way!
Perhaps the moral of my story is, even with a friend or a family member, if they are paying you rent, it’s still important to do everything by the book to avoid any complications and regrets later. If you really want to make sure you’re still all friends and on speaking terms by the end of the tenancy, think about using an agent.
“Regardless of whether you are renting to family or friends, most insurance policies would still expect you to have them on an assured shorthold tenancy, so that you still have full control in the event that something does go wrong. Ultimately this will also give you peace of mind that you have the right insurance in place for your own protection.”
Steve Barnes, Head of Broking, Total Landlord
Experience shows that letting property to family members and friends, especially if this is done by cutting corners, is more likely to result in problems than is the case when renting to strangers. That’s not to mention the strain letting your property to family and friends can eventually put on family or friendly relations. If you must enter into this arrangement, make sure you do it the right way and follow all the procedures and lettings laws and regulations, as you would for a tenancy with tenants you don’t know
