"These findings suggest that while many landlords are open to renting to someone they know, most recognise the importance of putting formal structures in place"
- Michael Dear - Hiscox
Nearly two-thirds of UK landlords have rented their property to someone they know, with almost one in five doing so without a formal agreement, according to new research from specialist insurer Hiscox.
The survey of 164 UK landlords found that 64% had rented to a friend or family member. Of that group, only 46% used a formal tenancy agreement. The findings arrive against the backdrop of the Renters' Rights Act, published in May, which represents one of the most significant reforms to the UK rental market in decades.
Among landlords who did formalise their arrangements, the most common provisions were a written tenancy agreement (69%), safety checks such as gas and electrical inspections (54%), deposit protection (46%), an inventory or condition report (41%), and specialist landlord insurance (40%).
Michael Dear, landlord insurance product lead at Hiscox, says the results point to a broad awareness of the need for formal structures, even between people who know each other well. "These findings suggest that while many landlords are open to renting to someone they know, most recognise the importance of putting formal structures in place.
"Clear agreements, safety checks and deposit protection help set expectations early and reduce the risk of misunderstandings. Ultimately, renting to someone you know doesn't remove the responsibilities of being a landlord, if anything, having the right processes in place becomes even more important."
When informality goes wrong
Rachael W. learned this lesson first-hand in 2023, when she allowed a friend to stay in her property on an informal basis while it was up for sale. With no tenancy agreement in place, the arrangement was based on mutual convenience and a shared understanding that the friend would leave before the sale completed.
"I was selling my home, so I didn't want a full tenancy in place in case it sold quickly," Rachael says. "My friend needed to move out of her parents' home, so I offered her the chance to stay at a reduced rent, with the understanding she'd move out before the sale completed."
The problems only became clear once the tenant had moved out. "I had cleaned and repainted the property so it was in excellent condition. But when she left, I found scuffed walls, broken freezer drawers, and a filthy cooker. The most frustrating part was a leak in the bathroom that hadn't been reported, which caused further damage after an attempted DIY fix."
The experience left Rachael with unexpected repair costs and a damaged friendship. "After just a couple of months, it looked completely different. I'd always taken pride in the property, so it was upsetting to see it like that," she said. "A formal document would have made things much easier. Even though it was temporary, it would have helped set expectations and given both of us more clarity around responsibilities."
A formal approach that worked
However, Rachael also has experience with landlords renting to friends and family going well. In 2016, she rented to a colleague and her partner after the property came up for renewal.
"I had rented to strangers before, but when the property came up for renewal, a friend from work asked if she and her husband could view it," she explains.
"The arrangement was formalised from the outset: We downloaded a six-month Assured Shorthold Tenancy (AST) and added a clause to have an end-of-tenancy clean. The agreement clearly outlined which bills the tenant was responsible for and when rent reviews would take place. We also paid for credit checks and referrals."
The tenancy ran for 18 months without issue. "Having everything set out from the start helped protect both the property and the friendship," Rachael said.
Six steps landlords should consider
To help landlords avoid the pitfalls of informal arrangements, Hiscox has set out a checklist of key considerations.
A written tenancy agreement is the starting point. Even between people who trust each other, a formal contract sets out responsibilities, rent terms, and property rules, protecting both parties if a dispute arises. Safety checks are also a legal requirement before a tenancy begins, and landlords should keep pace with regulatory changes, including the Renters' Rights Act.
Right to rent checks cannot be skipped simply because the tenant is known to the landlord. Some landlords also carry out referencing to ensure documentation is in order. Where a tenancy requires it, deposits must be placed in a government-approved scheme within the required timeframe, applying to most private residential tenancies including those with friends or family.
An inventory, with photographs, taken before the tenant moves in can significantly reduce disputes over damage or missing items at the end of the tenancy. Finally, landlords should review their insurance to confirm it adequately covers both the property and the rental activity, as some insurers may set out additional conditions during a tenancy.
Dear says the risks of informal arrangements go beyond property damage. "Renting to friends or family may feel convenient, but it can quickly lead to misunderstandings, property damage, or disputes if arrangements aren't formalised. Even with people you trust, having a proper tenancy agreement in place is essential.
"Clear contracts set expectations around rent, responsibilities, and property care, providing landlords with a concrete reference if issues arise. Combined with safety checks and documentation, this approach can help protect both your property and your personal relationships, ensuring the tenancy runs as smoothly as possible."
