It’s in our nature to help family and friends. Most individuals would loan money to their relatives, help family with household chores, and even provide a roof over their heads if they were in need.
So how about leasing property to a family member?
Much like any arrangement that mixes personal and business life, renting to family or friends has the potential to cause disputes (and affect your relationship) if you do not set rules and expectations from the beginning.
Below are the dos and don’ts for leasing a room or rental property to a family member in order to steer clear of conflict and other problems.
Related Document: Residential Lease Agreement
- Do establish rules. Renting to family or friends should follow the same procedures as when you are leasing to a stranger. This means putting on your landlord hat and establishing boundaries. If they are renting a room, discuss shared space and your expectations for cleanliness and household chores. Whether this requires a lease, or just setting aside some time to talk about the house rules, is up to you. For those renting a property outside their own home, a written lease is highly encouraged to spell out both party’s responsibilities, protect your investment, detail permissions of the tenancy (such as pets or smoking), and prevent future disputes.
- Do charge rent. Charge a reasonable sum like you would if you were leasing the space to any other tenant. After all, no one lives for free and you shouldn’t have to support a family member by paying the full mortgage in a property you have acquired as an investment. A relative might think they don’t need to pay rent on time, or that you can cut them a deal. Treat this arrangement like a business transaction and stay firm on your rental price. A room in your own home may be an exception, but they should still provide some form of contribution to help cover the additional utilities they will be using. If they can’t offer anything financially, at least ask that they contribute in other ways (babysitting, housecleaning or bookkeeping) to compensate.
- Do hold them accountable. If your family member damages the property in any way, make sure you hold them accountable by having them pay for the damage. Also, if they don’t follow your rules, you should enforce consequences, such as additional fees for late rent. If they disrespect your property in a way that exceeds normal wrongdoings, such as illegal activities, then it is in your power to evict them much like a normal tenant. Ultimately, as hard as it may be, this kind of behavior is not acceptable by anyone, regardless if they are family.
- Don’t be too lenient. You established rules for a reason. It’s easy to give your family or friends a second chance, but if you don’t stand up for yourself, they will only continue to take advantage of your nice ways. For instance, if they make improvements or renovations to your property without consent, you should be firm in your convictions, especially if their handiwork is going to cost you money. Letting this behavior continue only enables it. Make property rules clear from the beginning and enforce the terms of your lease agreement.
- Don’t assume you will agree on everything because you are family. If you are renting space to a family member, it’s important that you be realistic about your living situation. Sharing a space with a roommate can be difficult if you don’t have the same habits, attitudes and lifestyle. When your roommate is your relative, this can be further complicated by family issues, or other obligations. Because it is your space or property, it is your responsibility to set the rules and govern the relationship. Sometimes family can make you act differently because you are related and feel a sense of devotion to them. While this may be true, it does not mean they can disrespect you or your property. Keep business separate from your personal relationship. Honesty, mutual respect and a clear understanding of what is expected from you both will help preserve your relationship.
- Don’t stretch yourself too thin. Depending on your situation, leasing property to a family member or friend can be stressful. It’s important you don’t forget to take care of yourself, and avoid extending your goodwill beyond your emotional and financial means. In other words, if you are leasing your relative a room or rental suite, it shouldn’t be your responsibility to clean up after them and cook for them too. If they are demanding, you may need to rethink your plan to lease to them entirely.
Ideally, if you are leasing a space to a family member, they will be grateful for the blessing and respectful of your property. However, not everyone is the ideal tenant (or relative in this case).
Consequently, it’s important for you to treat this relationship like you would any other tenant-landlord relationship and sign a lease, charge them rent (or ask for their contribution), and remain firm about your rules.
Who knows, your family member might be the best roommate or tenant you will ever have.
Otherwise, you need to keep the terms of the tenancy business as usual to not only protect yourself from financial loss but also to prevent the deterioration of your relationship.