Can I rent my buy-to-let to a family member?

Updated: 3 November 2025

Yes, you can often rent your buy-to-let to a close family member in the UK, however the mortgage type and underwriting change. If a close relative such as a parent, child, sibling or grandparent will live in 40 percent or more of the property as their home, the loan usually becomes a regulated mortgage contract under the FCA rules, sometimes called a “regulated buy-to-let” or “family buy-to-let”.

In that case lenders assess affordability like a residential mortgage, not purely on rental income. If your relative will occupy less than 40 percent, for example they rent one room in an HMO, a standard buy-to-let may still be possible and lenders will use rental stress testing.

According to the FCA and the UK Regulated Activities Order, regulated mortgages apply to individual or trustee borrowers, so a limited company buy-to-let to a relative is not an FCA-regulated mortgage contract, yet many lenders treat it as a connected-party let and apply tighter policies.

You must also meet landlord duties, for example Right to Rent checks, deposit protection, electrical safety, EPC E and smoke and CO alarms. A specialist broker can map the right route, compare mainstream and specialist options, and flag pitfalls early.

Written by Ben Stephenson, CeMAP‑qualified Mortgage Broker, and reviewed by Mortgage Experts. Manor Mortgages Direct is FCA authorised (496907), has been in business for nearly 30 years and is highly positively reviewed, 4.9 rated on Google. We have helped thousands successfully secure the right mortgage. Bristol based mortgage brokers, we assist nationwide.

Table of contents

• What counts as a “family let” and why is it regulated?

• Is it different if I own the property in my personal name?

• How does the limited company scenario work?

• When might a standard buy-to-let still be accepted?

• How do lenders actually underwrite family lets in 2025?

• Pros and cons, what changes in practice?

• Policy exceptions and the “lender acceptance spectrum”

• Step-by-step, how to secure the right mortgage

• Case study, from decline to approval

• Expert tips and common mistakes to avoid

• What surveyors and underwriters look for

• Why this matters in 2025

• FAQs

• Glossary

• Reader’s checklist and next steps

What counts as a “family let” and why is it regulated?

In UK mortgage regulation, a loan secured on a home is a regulated mortgage contract if at least 40 percent of the property is used as, or in connection with, a dwelling by the borrower or a related person. A related person includes a spouse or civil partner, a partner with the characteristics of a spouse, and your parents, siblings, children, grandparents or grandchildren. This is why lending to enable a close relative to live in your rental is often called a regulated buy-to-let or family buy-to-let.

Key point: If your relative will live in 40 percent or more of the property as their home, most lenders and the FCA definition will treat the mortgage as regulated, so it follows residential-style rules rather than standard, business buy-to-let rules.

Is it different if I own the property in my personal name?

Yes. When you borrow as an individual, and a close relative will occupy the property as their home, the loan typically meets the regulated mortgage definition. That means the FCA MCOB rulebook applies, the advice process is more formal, and affordability is assessed on your personal income and outgoings rather than solely on rental income.

By contrast, where no related person lives there and it is a standard buy-to-let, lenders follow the PRA SS13/16 expectations, using interest coverage ratio stress tests and rental-based affordability.

Practical effect: With a regulated family let in your own name, expect residential-style documentation and affordability. With an unregulated BTL, expect ICR stress tests and portfolio scrutiny.

How does the limited company scenario work?

This is where many online guides are vague. Under the Regulated Activities Order, a regulated mortgage contract is where a lender provides credit to an individual or to trustees, secured on land that is used as a dwelling by the borrower or a related person. A limited company borrower is not an individual and is not a trustee, therefore a company buy-to-let cannot be a regulated mortgage contract simply because a relative occupies.

However, lenders still treat a relative living in a company-owned buy-to-let as a connected-party let. Many mainstream lenders do not permit connected-party tenancies in their standard company BTL range, while some specialist, intermediary-only lenders may consider them on a case-by-case basis, often at lower maximum LTVs, with market-rent evidence and robust tenancy documentation.

Bottom line: Company structure avoids FCA regulation, but it does not mean any lender will accept a family tenant. Policy tolerance for connected-party lets varies widely, so criteria research is crucial.

When might a standard buy-to-let still be accepted?

A standard BTL may be possible where the related person occupies less than 40 percent of the property. Typical examples include a multi-let or HMO where a relative rents one room. The 40 percent threshold comes from the regulated mortgage definition, which turns on the proportion of the property used as a dwelling by you or a related person. Lenders will still require market rent, independent referencing, and the tenancy to be clearly arm’s length.

How do lenders actually underwrite family lets in 2025?

1) For regulated family lets in personal names

• Rulebook: Treated as regulated mortgages under MCOB, with advice, disclosure and affordability tested on your income and outgoings.

• Evidence: Payslips or SA302s, bank statements, credit checks, plus rent valuation to prove the tenancy is commercial.

• Stress: Lenders may still consider rental cover, but personal affordability is the primary test.

2) For unregulated BTL or company BTL

• Rulebook: PRA SS13/16 underwriting, using ICR and a stressed interest rate. Policies vary by lender and by rate type.

• Connected-party overlay: Even if unregulated, a family tenant is a policy flag. Expect requests for a professional AST, full market rent proof, and possibly lower LTV caps.

What surveyors look for

• Market rent supported by comparables and tenancy terms that look commercial, not preferential.

• Condition and compliance visible at inspection, including smoke and CO alarms, and any EPC-related issues.

What underwriters look for

• Arms-length tenancy despite the relationship, including deposit, rent payment standing order and referencing.

• Right to Rent checks completed correctly.

• Evidence the let is not below-market, because HMRC can restrict expense deductions where a property is let to family on non-commercial terms.

Pros and cons, what changes in practice?

Pros

• Purpose fit: Allows you to house a relative while keeping clear legal and financial structures.

• Consumer protections: Regulated family lets benefit from the FCA’s residential-style protections and advice process.

• Portfolio planning: Can sit alongside other investment properties.

Cons

• Affordability discipline: For regulated family lets, lenders assess your income, not just the rent.

• Fewer lenders: Standard BTL panels shrink for connected-party tenancies.

• Tax traps: Below-market rent may curtail expense reliefs.

• Compliance overhead: Right to Rent, deposit protection, EICR, EPC and alarms still apply to family tenants.

Policy exceptions and the “lender acceptance spectrum”

We see a spectrum from red lines to more flexible:

• Usually unacceptable: No tenancy agreement, rent set well below market, or “informal family arrangement” with no deposit or references.

• Possible with strong mitigants: Low LTV, full market rent, independent referencing and a professional AST, plus evidence of personal affordability if regulated.

• Most flexible: Specialist, intermediary-only lenders that may consider connected-party lets with robust documentation and valuation support. Always no guarantees, and outcomes vary by case.

Step-by-step, how to secure the right mortgage

1. Define the occupancy clearly, who will live there and what proportion of the property, to determine if it is regulated.

2. Choose structure, personal name versus limited company, mindful that company loans are not FCA-regulated but are still policy-sensitive when a relative occupies.

3. Evidence market rent via letting agent letters or surveyor’s opinion.

4. Set a commercial tenancy, AST terms, deposit within the Tenant Fees Act caps and protect the deposit within 30 days.

5. Complete legal landlord duties, Right to Rent, EICR, EPC E or better, smoke and CO alarms.

6. Affordability pack if regulated, or ICR workings if unregulated.

7. Submit through a broker with access to specialist panels and intermediary-only lenders where appropriate.

Missing one clause in your tenancy, for example deposit protection, could jeopardise your mortgage offer or add legal risk later.

Case study, from decline to approval

Scenario: Emma wants to buy a two-bed flat so her mother can live there. Purchase in personal name, 60 percent of the flat will be her mother’s dwelling.

Issue: Standard BTL application was declined as related-party occupancy made it regulated, so the lender’s BTL policy did not apply.

Fix: We re-worked it as a regulated mortgage with residential affordability, kept market rent via standing order to demonstrate commerciality, and ensured Right to Rent and EICR/EPC compliance was documented up front. The case proceeded on a residential-style product suitable for family occupancy with a modest LTV.

Expert tips and common mistakes to avoid

• Do not under-rent to family. HMRC treats non-commercial lets differently, which may reduce allowable expenses.

• Document everything, referencing, deposit, AST and rent payment trail.

• Do the safety basics early, EICR report, alarms, EPC. Surveyors and underwriters expect it.

• Company is not a shortcut. A limited company avoids FCA regulation, but lenders still police connected-party lets and many will decline.

• Check benefits interactions if your relative may rely on Universal Credit. Support for housing costs is restricted in certain close-relative arrangements, especially when the landlord lives in the same home.

What surveyors and underwriters look for

Surveyors focus on market rent, property condition and whether the arrangement looks arm’s length.

Underwriters check regulatory classification, Right to Rent evidence, affordability route, portfolio context and tenancy terms. They align to MCOB for regulated cases and PRA SS13/16 for unregulated BTL.

Why this matters in 2025

• Regulation has not been watered down. The 40 percent related-person rule still defines many family lets as regulated.

• The PRA continues to expect prudent BTL underwriting, and near-final updates keep standards front of mind.

• Landlord compliance remains active policy, with EICR, EPC E and smoke/CO alarms enforced. Civil penalties for non-compliance can be serious.

  
  

FAQs

Is “regulated buy-to-let” the same as “consumer buy-to-let”?

Not exactly. Consumer buy-to-let covers certain non-business BTL cases, but if a close relative occupies 40 percent or more, it is generally a regulated mortgage contract and falls under MCOB, not just CBTL rules.

Who counts as a close, or related, person?

Spouse or civil partner, a partner with the characteristics of a spouse, and your parent, sibling, child, grandparent or grandchild.

If my relative only rents one room, can I avoid a regulated family let?

Often yes, if that room is less than 40 percent of the property and the rest is let to others, but lenders still expect a commercial tenancy and market rent.

Does the tenancy type change with family?

If you do not live in the property, the tenancy is usually an AST with all the normal protections, including deposit rules. If you do live there, the relative may be a lodger/excluded occupier, and different rules apply.

Can my relative claim Universal Credit housing costs?

It depends. Rules are tighter if they live with a close relative landlord in the same home. Independent, commercial tenancies in a separate home are treated differently. Seek benefits advice early.

What compliance is non-negotiable even with family?

Right to Rent checks, deposit protection, EICR, EPC E and smoke/CO alarms. Expect underwriters to ask for proof.

Glossary

• Regulated mortgage contract, an FCA-regulated home loan where at least 40 percent is used as a dwelling by the borrower or a related person.

• Consumer buy-to-let (CBTL), a buy-to-let that is not entered into wholly as a business, subject to specific rules under the MCD Order.

• Connected-party let, a tenancy where the occupant is related to the landlord or, for companies, to the directors or shareholders.

• ICR, interest coverage ratio used in BTL affordability under PRA SS13/16.

Reader’s checklist, questions to ask a broker or lender

• Regulatory category, will this be regulated or unregulated based on who lives there and how much of the property they use?

• Structure: personal name or limited company, and how will connected-party policy affect it?

• Affordability route: residential-style income checks or BTL ICR stress tests?

• Compliance pack: Right to Rent, deposit protection, EICR, EPC, smoke/CO alarms.

• Tenancy evidence: market rent, independent referencing and AST.

Hidden costs people forget

• Safety remediation after EICR.

• Upgrades to meet EPC E or better.

• Deposit protection and scheme fees, or penalties if missed.

• Independent referencing and additional tenancy drafting.

Comparing specialist vs mainstream lenders

• Mainstream often have a blanket no connected-party rule in BTL ranges and tighter affordability for regulated cases.

• Specialist, broker-only lenders may allow connected-party lets with strong compensating factors, for example lower LTV, market rent and documented affordability.

Impact on timescales

Regulated routes can take a little longer due to advice and residential-style underwriting. Company BTL with a family tenant can also be slower where a policy exception needs sign-off.

“Red flags” lenders will spot immediately

• Below-market rent or no deposit.

• “Informal” tenancies without referencing.

• No evidence of Right to Rent checks.

• Old or missing EICR, EPC or alarms.

Final word and next steps

Letting to family is absolutely possible, but the correct route, regulated family buy-to-let versus standard or company BTL, hinges on who lives there and how much of the property they occupy. The first step is a quick triage against the 40 percent rule, then we shape the application and evidence around commercial market rent and full compliance.

We are expert mortgage advisers with experience in arranging regulated family lets and connected-party buy-to-lets nationwide. Get in touch today on 01275 399299.