Rent to rent or guaranteed rent - guide for landlords

Landlord guide

Rent to rent or guaranteed rent is where you, as the owner landlord, enter into a commercial agreement with an individual or company. That business then lets the property to tenants and manages it, while you receive an agreed rent.

This can offer a more hands off arrangement, but it also creates extra legal and practical risks. The Renters’ Rights Act changes key parts of the private rented sector in England, so landlords using rent to rent arrangements should review their agreements, compliance processes and responsibilities.

What is rent to rent?

Under a rent to rent arrangement:

you grant a commercial agreement to an operator or company
that operator then rents the property, or rooms within it, to occupiers
the operator collects rent from the occupiers
you receive a fixed or guaranteed rent from the operator

The operator makes its income from the difference between the rent paid to you and the rent received from the occupiers.

This type of arrangement can be attractive where you want regular income and less day to day involvement. However, it is important to understand that it does not remove all of your legal responsibilities as the property owner.

How the arrangement should be set up

The agreement between you and the operator should usually be a commercial agreement, not an assured tenancy, because the operator will not be living in the property.

The agreement should clearly set out:

the length of the arrangement
the rent you will receive and when it must be paid
whether the operator has authority to sublet the property
who is responsible for repairs and maintenance
who is responsible for safety checks and compliance
who is responsible for licensing
how the agreement can end
what happens if occupiers are still living in the property when the commercial agreement ends

You should also consider whether there is an early termination clause and what costs may arise if the arrangement ends early.

Why landlords should take care

In many rent to rent arrangements, the operator becomes the immediate landlord of the occupiers. Even so, the owner landlord may still retain important legal duties, especially around property condition, safety and licensing.

Before signing any agreement, check:

whether your mortgage lender allows this arrangement
whether your insurance covers commercial letting and subletting
whether the property is leasehold and, if so, whether the lease allows subletting
whether the operator has relevant experience
whether the operator has suitable professional indemnity insurance
whether the property could become a House in Multiple Occupation
whether a licence is needed from the local authority

You should also research the operator carefully. A guaranteed rent promise is only useful if the business behind it is reliable and financially sound.

Tenancy reforms under the Renters’ Rights Act

The Renters’ Rights Act changes the tenancy system in England.

Key reforms include:

the abolition of fixed term assured tenancies
the move to periodic tenancies as the standard model
the end of section 21 no fault evictions
new rules on possession, with landlords needing to rely on valid legal grounds

What this means for rent to rent arrangements

This is a major issue for landlords using rent to rent.

Your commercial agreement with the operator may still run for a fixed period, but the occupier’s tenancy will sit under the new tenancy framework. That means:

the occupier’s rights do not simply end because your agreement with the operator ends
the operator cannot rely on old assured shorthold tenancy wording or fixed term assumptions
possession must still be handled lawfully using the correct legal route
landlords should think carefully about what happens if the operator leaves but occupiers remain in place

This makes it vital for your commercial agreement and the occupier’s agreement to work together. If they do not, you may face delays, disputes and difficulty recovering possession.

Private Rented Sector Landlord Ombudsman

The Renters’ Rights Act introduces a new Private Rented Sector Landlord Ombudsman.

This service gives tenants a route to complain about a landlord’s actions, inaction or behaviour. It is intended to provide quicker, fair and binding resolution without every case needing to go to court.

The ombudsman may require a landlord to:

apologise
provide information
take action to put things right
pay compensation

Joining the ombudsman

Private landlords with assured or regulated tenancies in England will be required to join the ombudsman service, including where a managing agent is used.

In a rent to rent arrangement, it is important to identify who the occupier’s landlord is in law and who must join the scheme. Depending on the structure, this may be the operator rather than the owner landlord, but landlords should not make assumptions. You should review the arrangement carefully and make sure the right party complies.

Why this matters

If complaints are not handled properly, they may be escalated to the ombudsman. This adds another layer of accountability for landlords and operators and makes good record keeping, clear complaint handling and prompt action even more important.

Deposit protection

Deposit protection rules still apply.

If a tenancy deposit is taken from a tenant, it must be protected in a government authorised tenancy deposit protection scheme, such as mydeposits, where the law requires it. The tenant must also be given the prescribed information within the legal deadline.

A deposit paid by the operator to you under a commercial agreement is not usually a tenancy deposit. But any deposit taken from occupiers under their residential tenancy must be protected correctly.

Why this matters for landlords

Landlords should not assume the operator has dealt with deposit protection properly. You should check:

who is taking the deposit
who is named as landlord in the tenancy agreement
who is protecting the deposit
who is serving the prescribed information
how deposit disputes will be handled

Penalties for non compliance

Failure to comply can lead to:

financial penalties ordered by the court
restrictions on possession in some cases
disputes with tenants
wider compliance and enforcement issues

Clear written processes will reduce risk.

Decent Homes Standard

The Renters’ Rights Act applies the Decent Homes Standard to the private rented sector.

This means privately rented properties will need to meet required standards of safety, repair and basic condition. This applies to properties used in rent to rent arrangements as well.

Landlords should make sure the property is:

safe to live in
in a reasonable state of repair
free from serious defects
suitable for the number of occupiers
managed properly where facilities are shared

Where a property is let room by room, shared areas will be especially important. Kitchens, bathrooms, hallways and heating systems must all be considered.

Awaab’s Law

Awaab’s Law is being extended to the private rented sector.

This will introduce legal expectations for landlords to investigate and deal with serious hazards, such as damp and mould, within set timeframes once the detailed rules are brought into force.

For landlords, this means repair reporting and response systems need to be clear and effective. In a rent to rent arrangement, there should be no uncertainty about who is responsible for dealing with hazards.

You should make sure there is a clear process to:

receive reports from occupiers
inspect issues promptly
assess serious hazards without delay
arrange remedial works
keep written records of action taken
monitor whether works are completed properly

Delays in dealing with damp, mould or other serious hazards can lead to complaints, enforcement action and legal claims.

Licensing and compliance

Rent to rent arrangements often involve room lets, so there is a higher chance that the property may be a House in Multiple Occupation.

You should check:

whether the property is an HMO
whether a mandatory HMO licence is required
whether additional or selective licensing applies in the area
who is responsible for applying for and maintaining the licence
whether licence conditions are being met in practice

Do not assume the operator will deal with this unless it is clearly set out and monitored.

Enforcement and penalties

The Renters’ Rights Act strengthens enforcement powers for local councils.

Councils will have broader powers to investigate suspected breaches and take action where landlords or others fail to comply. This includes powers to require information and, in some cases, powers of entry.

For landlords using rent to rent arrangements, enforcement may relate to:

poor property conditions
failure to meet safety obligations
licensing breaches
failure to join required schemes
misuse of possession grounds
failures linked to the new legal framework

Civil penalties

The strengthened framework allows for:

civil penalties of up to £7,000 for initial or less serious non compliance
civil penalties of up to £40,000 for serious, repeated or ongoing non compliance
criminal prosecution in some cases

Rent repayment orders are also being strengthened, which increases the financial risk where offences are committed.

Questions to ask before signing

Before entering into a rent to rent arrangement, ask the operator:

Are you a member of a redress scheme where required?
Who will be the legal landlord of the occupiers?
Who will join the landlord ombudsman if required?
Who will protect tenant deposits?
Who will deal with repairs and hazards?
Who is responsible for licensing?
What happens if the commercial agreement ends while occupiers remain in place?
What insurance do you hold?
What experience do you have managing similar properties?
What happens if rent is not paid or the property is left empty?

Practical steps for landlords

To reduce risk, landlords should:

review the commercial agreement carefully before signing
check mortgage, insurance and lease restrictions
confirm who is responsible for compliance tasks
make sure deposit protection arrangements are clear
understand how complaints will be handled
check whether the property meets required standards
monitor repairs, safety checks and licensing
keep records of inspections, correspondence and agreements

Final point

Rent to rent can work for some landlords, but it needs careful oversight. The Renters’ Rights Act raises expectations on complaint handling, property standards, enforcement and tenant protection.

Before entering into any agreement, review the legal structure, confirm who is responsible for what and make sure the arrangement is fit for the new rules.