The short answer is yes, you do need landlord insurance if you’re letting to family.
Acting as a landlord to family members is a common and increasing phenomenon in the UK. Usually, it’s mum or dad who’s the landlord, and a child, perhaps with their partner, who is the tenant.
A recent survey revealed there are currently 730,000 parent landlords in Britain. With market rents rising, and the difficulty of buying a first home remaining a serious problem, that number is increasing all the time.
There are currently 730,000 parent landlords in Britain
It’s only natural that parents want to help their children by ensuring they have a decent roof over their heads. They may also have bought property as an investment and letting to their children provides them with somewhere to live while keeping the property maintained and secure. The rent (often less than market value) helps to pay off the mortgage, or provides an extra income. Sometimes parents have retired to live elsewhere, while the children pay a token amount to stay in the family home.
Landlord arrangements with family may be formal or informal, but the bottom line is that if a family member is paying rent then the parent-owner is legally their landlord. As such, taking out landlord insurance is a very good idea. Often informal landlords letting to family think that their standard home insurance will cover the building and contents. However, if they’re not resident in the property, that is not the case.
Put a tenancy agreement in place
It is always advisable to have a written tenancy agreement, even with family members. If money is changing hands then a shorthold tenancy agreement is considered to be in place, even if nothing has been written down. For legal reasons, including claiming appropriate insurance, a written contract should be in place. Basic templates are available online, from high street stationers or the post office.
Do I need legal expenses insurance?
As well as building and contents insurance, a standard landlord insurance package often includes public and employers’ liability insurance. Remember, there will be visitors to the property, both your children’s friends and workmen, such as plumbers, electricians, etc. Any one of these could sue you if they had an accident when on the property.
You should also consider adding landlord legal expenses cover to your policy. This provides cover in case of any disputes with the tenant (for instance over unpaid rent) or claims for accidents on the property.
You might think with family members you don’t need this, but you could do. For instance, your child might be living in your property with a partner. Should the relationship end, it’s conceivable the partner may stay on in your property alone. In such a situation you would certainly want to have standard legal insurance in place.
The only way to avoid needing landlord insurance is if no money changes hands. If you receive rent, even if it’s on an irregular, “what you can afford” basis, then you are still a landlord and you should have a simple contract written up and the correct insurance in place. You may be their parent, but you’re also their landlord, so make sure you’re covered for everyone involved.