Renting a property to a family member can feel like the most straightforward arrangement in the world. Trust is already established, expectations feel easier to manage, and the pressure of marketing the property disappears altogether. Yet from an insurance and legal standpoint, letting to relatives is rarely as simple as handing over the keys.
At Ashburnham Insurance, we often see situations where landlords assume that informal, family-based arrangements require less structure and fewer protections than standard tenancies. Unfortunately, this is where many problems begin.
A tenancy agreement is not merely a formality; it is a protective measure for both parties and a requirement that underpins the validity of your landlord insurance. If you’re considering renting a home to a sibling, parent, child or cousin, you’ll still need to approach the arrangement with the same diligence you’d apply when renting to a stranger.
Why Formal Agreements Matter Even With Family
The main reason many landlords hesitate to create a formal agreement with family is the fear of seeming mistrustful. After all, it can feel awkward to ask a relative to sign a legally binding contract outlining their obligations. But a tenancy agreement is a tool that clarifies expectations and prevents misunderstandings that could strain family relationships later.
Many disputes between family landlords and tenants arise not from malice but from unclear expectations. A tenant may believe repairs fall under the landlord’s responsibility, while the landlord may assume the family tenant will take care of minor issues themselves. Similarly, disagreements over rent increases or notice periods often turn emotional when there is no written framework in place. A formal agreement removes ambiguity and ensures that both parties know where they stand, allowing the relationship to remain cooperative and respectful.
The Legal Status of Family Tenancies
Letting to a family member does not exempt you from legal obligations. Even if you are charging a reduced rent, you are likely still creating an Assured Shorthold Tenancy (AST) unless very specific conditions apply. This means that the same legal protections and responsibilities associated with typical private rentals still apply.
You must observe safety regulations such as annual gas safety checks, working smoke alarms, electrical safety standards and right-to-rent checks for tenants over 18. Many landlords assume relatives are exempt from such requirements, but the law does not distinguish between “family tenancies” and “regular tenancies” when it comes to safety. Failing to meet these obligations can carry serious consequences, including fines, invalidated insurance and the inability to enforce the tenancy in court if needed.
Insurance Implications of Skipping the Paperwork
One of the most important reasons to formalise the arrangement is the impact it has on your landlord insurance. Insurers need clarity on who occupies the property and under what terms. If you allow a relative to move in without a tenancy agreement, it may be interpreted as an informal lodging or even a non-commercial arrangement, both of which can influence the type of cover required.
A tenancy without documentation creates a level of uncertainty that can affect claims handling. For example, if accidental damage occurs and the insurer cannot confirm the tenant’s responsibilities, the claim may be delayed or declined. Similarly, loss of rent and legal protection policies often require evidence of a valid tenancy agreement. If the arrangement is purely verbal, the cover may not apply.
In cases where the landlord is charging a significantly reduced rent, insurers also need to know whether the arrangement is still considered a commercial tenancy. Not all policies cover family tenants paying below-market rent, and some may require a specialist product. Without a formal agreement stating the rental amount and conditions, insurers have no way of assessing the risk accurately.
Creating a Clear and Fair Tenancy Agreement
A well-drafted tenancy agreement should outline the key details of the arrangement in plain terms. Even when renting to family, the agreement should specify the rent amount, payment dates, responsibilities for utility bills, maintenance obligations, rules regarding pets or alterations, and the notice required for eviction or termination. These elements protect the landlord just as much as they protect the tenant.
It is always advisable to use a professionally drafted AST template or consult with a solicitor to ensure compliance with current legislation. While many landlords turn to free templates online, these are often outdated or incomplete. As the landlord, you are ultimately responsible for ensuring that the agreement is legally sound.
In some cases, landlords renting to family members choose to include additional clauses, such as agreements about how rent arrears will be handled or how informal arrangements for repairs will be managed. This can be especially useful when a relative is paying a reduced rent, as it removes any assumptions about the landlord’s obligations.
Keeping the Relationship Professional
One of the biggest challenges landlords face when renting to family members is maintaining professionalism. Without boundaries, it becomes easy for the tenant to fall behind on rent or overlook property care responsibilities simply because they feel the relationship protects them from consequences.
A formal tenancy agreement helps establish those boundaries. However, enforcing them consistently is equally important. Rent should be collected through regular methods rather than through sporadic cash payments, and inspections should be conducted as they would be for any tenant. These inspections are not only encouraged from an insurance perspective but also help ensure that the property is being maintained in line with the agreement.
It is also wise to keep written records of any communication regarding repairs, rent issues or changes to the tenancy. Clear documentation is invaluable if disputes arise later, or if an insurance claim requires evidence of the tenant’s obligations.
Protecting the Property, the Relationship and the Insurance
Letting to a family member can be a positive experience when handled properly. Many landlords appreciate the reassurance of having a relative as a tenant, and many tenants appreciate the stability and trust that comes with renting from someone they know. But without a formal tenancy agreement, what begins as a friendly arrangement can quickly become complicated.
From an insurance standpoint, clarity and documentation are essential. Ashburnham Insurance encourages landlords to treat family rentals with the same level of professionalism as any other tenancy. This ensures the property is protected, the insurer has the information required to provide accurate cover, and the family relationship remains intact and stress-free.
If you need guidance on insurance for letting to family members or want to check whether your current arrangement meets policy requirements, Ashburnham Insurance can help you find the right protection for your property and circumstances. Give us a call on FREEPHONE 0800 1696137 to find out more.