How should I insure a property that I let to a family member?

If you rent a property to a family member, it’s tempting to be relaxed about the paperwork. After all, it’s not like renting to a stranger, is it? Well, yes, it is – or at least it should be.

Chris King

Head of Home Insurance

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Posted 28 DECEMBER 2020

Do I need a tenancy agreement when renting property to a family member?

It’s common for landlords to let their properties to family members. But most experts would still recommend you have a tenancy agreement of some kind.

It may be tempting not to bother, but things can, and do, go wrong in family situations. There can be a lot of politics, with money lying at the heart of most squabbles.

A tenancy agreement will make both of your obligations as landlord and tenant absolutely clear, which will help avoid arguments down the line.

What insurance do I need if I’m renting to a family member?

Regardless of who your tenant is, it makes sense to get proper landlord insurance cover and rental protection.

In some ways, landlord insurance is very similar to regular home insurance. For example, the buildings insurance aspect will be standard. But a regular home insurance policy won’t cover you for liability – if your tenant hurts themselves in an accident, for instance. Or for legal cover in the event of disputes or unpaid rent. These both come as an option with landlord insurance.

What exactly does landlord insurance cover me for?

Landlord insurance can cover you for:

buildings insurance
contents cover
loss of rent
damage or theft by tenants
legal action
public liability
squatter eviction

While you’d hope you wouldn’t need any of these when letting to a family member, the fact is you never know so you should consider insurance.

What else do I need to think about when letting to a family member?

There are still a few things the Mortgage Advice Bureau advises you to look out for. Such as:

you’ll be liable for tax
you may be obliged to charge a certain level of rent – if you have a buy-to-let mortgage, you may be required to charge 125% or more of the monthly mortgage cost
you’ll still need to meet health and safety regs – that means getting your annual gas safety check and Energy Performance Certificate, as well as having smoke alarms and carbon monoxide detectors fitted. It also means the property must be warm and free from damp and leaks

You still have responsibilities as a landlord, even if your tenants are family. That means you can’t ask them to overlook issues with the property in exchange for cheap rent. But being a landlord remains a great way to make money – last year UK tenants paid out a record £51.6 billion in rent.