The risks of renting to family

Annie Shaw / 21 February 2017

Money expert Annie Shaw advises a would-be landlord.


I am considering buying a property to rent to my son, his partner and children at a reasonable rate. 

The objective is to provide my son with an affordable home, a landlord he can trust and additional income for my wife and me in retirement. 

Are there any legal considerations when renting to immediate family, and any risks or drawbacks?


There is nothing to stop you renting a property to your son and his family, though it is advisable to have a formal rental agreement. 

Since it will be your second house, the purchase price will be subject to a 3% stamp duty land tax surcharge. 

You will need to pay income tax on the rent, as you would if you were renting to a third party. Likewise, the property must comply with health and safety regulations.

Since the property is not your principal private residence, if you sold it, it could be liable to capital gains tax. 

If your son and his partner were to split up, the partner could obtain rights to remain in the property, particularly if she had custody of the children. 

There are some restrictions around benefits payable to people who live in a property owned by a relative – a point worth considering if this is likely to apply to your son’s family. 

Finally, you should also consider what would happen in extreme circumstances – for example, if you died or were declared bankrupt. 

Consult a solicitor and take professional advice before proceeding.

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Annie Shaw

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The opinions expressed are those of the author and are not held by Saga unless specifically stated.

The material is for general information only and does not constitute investment, tax, legal, medical or other form of advice. You should not rely on this information to make (or refrain from making) any decisions. Always obtain independent, professional advice for your own particular situation.