Rent to Rent: Is It Legal and What Are the Risks?

Rent to rent is a heavily marketed property strategy in the UK. An owner hands the whole property to a company, takes a fixed monthly payment, and steps back from management. The company lets the rooms out individually and keeps the difference.

When a scheme fails, the owner is often the person the council prosecutes, the person the occupiers sue, and the person left with tenants they never chose.

What is rent to rent?

Rent to rent describes an arrangement where an owner grants a tenancy or licence of a whole property to an intermediary, usually a limited company. The intermediary pays a fixed sum each month, then grants its own tenancies or licences to the people who live there. It is marketed as guaranteed rent, rent to serviced accommodation, a company let, or a management agreement. There are three parties:

• The head landlord, who owns the property
• The intermediary, the company holding the head lease
• The occupiers, who pay the intermediary and live there

The owner owes legal duties to the occupiers despite having no contract with them.

Is rent to rent legal?

Yes. There is no law against letting a property to a company that then sublets it, and plenty of these schemes are run competently.

Housing law duties attach to people according to their factual relationship with a property, whatever the contract says. A contract can allocate cost between the parties but cannot allocate a criminal offence.

A clause making the intermediary responsible for licensing is useful evidence and a route to recovering money, but it is not a defence to prosecution.

What is the difference between a company let and a sublet?

A company let is the head lease itself. Under section 1 of the Housing Act 1988, a tenancy can only be an assured tenancy if the tenant is an individual who occupies the property as their only or principal home. A company can do neither, so the head lease sits outside the assured tenancy regime.

A sublet is what the company then grants. Those occupiers are individuals living there as their only or principal home, so their agreements are normally assured tenancies with the company as their landlord.

Since the Renters’ Rights Act 2025 came into force on 1 May 2026, those tenancies are periodic assured tenancies with no fixed end date. Assured shorthold tenancies can no longer be created, and section 21 no-fault eviction has been abolished. The occupiers an intermediary puts in are now far harder to remove.

What must the head landlord’s consent cover?

Bare permission to “sublet” does not control what creates the owner’s exposure. Consent should be specific about:

• How many people may occupy, and in how many households. This decides whether the property becomes a licensable house in multiple occupation.
• What type of agreement the intermediary may grant. Assured tenancies, licences and holiday lets carry very different consequences.
• Whether the property may be altered. Partitioning a reception room into two bedrooms is a common enforcement trigger.
• Who applies for and holds any licence.
• Access and inspection rights, and copies of every occupier agreement.

What happens without consent?

Subletting outside the terms of the head lease is a breach of the tenancy agreement and gives the owner a claim, but the money is usually gone by the time the breach surfaces.

Under section 18 of the Housing Act 1988, where a property has been lawfully let on an assured tenancy and the superior tenancy ends, that assured tenancy continues as a tenancy held of the person then entitled to possession. A lawful sub-tenant can become the owner’s direct tenant automatically.

What must a rent to rent agreement address?

Many people search for a “rent to rent agreement template” or a “rent to rent contract template UK”. We do not publish one, and we would advise against downloading one. Standard forms are drafted for an individual living in a property, so the clauses deciding who carries licensing liability and what happens on failure are absent.

A properly drafted agreement must deal with, at minimum:

1. The nature of the grant. Lease or licence, fixed term or periodic, and how it ends.
2. Permitted use and occupation levels, in numbers of people and households.
3. Licensing responsibility, including who applies and what happens on refusal.
4. Repair, fire safety and management obligations.
5. Insurance and mortgage compliance, since most buy to let lenders restrict subletting.
6. Security for the rent, ideally a personal guarantee from a director.
7. What happens to occupiers on termination.
8. Indemnities covering fines, civil penalties and rent repayment orders.

An indemnity only gives you a claim after you have already paid, and it is worth nothing if the intermediary has no assets.

Who is responsible for HMO licensing in a rent to rent arrangement?

A property is a house in multiple occupation under section 254 of the Housing Act 2004 where people in two or more separate households occupy it as their only or main residence and share a basic amenity such as a kitchen, bathroom or toilet, or it lacks one.

Mandatory licensing applies where an HMO is occupied by five or more people in two or more households, under the Licensing of Houses in Multiple Occupation (Prescribed Description) (England) Order 2018. Many councils go further with additional licensing for smaller HMOs and selective licensing covering ordinary lets, so the local scheme always needs checking. See our note on changes to HMO licensing.

Who is the “person having control”?

Section 263 of the Housing Act 2004 defines the two people licensing law cares about:

• The person having control receives the rack rent, meaning a rent of not less than two-thirds of the full net annual value of the property.
• The person managing is an owner or lessee who receives payments from the occupiers, or would receive them but for an arrangement with someone else.

The intermediary is usually the person managing, because it collects the rent. Depending on the figures, the owner can also be a person having control.

Can the head landlord be prosecuted?

Yes. Under section 72 of the Housing Act 2004, where a licensable HMO is unlicensed an offence is committed by any person having control of or managing it, by any person who is landlord or licensor to an occupier, and by any person holding a superior estate or interest to those people.

That last limb catches the owner, and the defences are narrow. An owner must prove they did not know and had a reasonable excuse for not knowing it was an HMO, that they took all reasonably practicable steps to ensure it was licensed, or that they had some other reasonable excuse.

Section 72(4C) then states that a term in the tenancy agreement about occupation does not on its own amount to a defence.

Conviction carries an unlimited fine, or a council may impose a civil penalty of up to £40,000 under section 249A. Selective licensing carries an equivalent offence under section 95.

Can occupiers claim a rent repayment order against the owner?

In Rakusen v Jepsen [2023] UKSC 9, a rent to rent case on almost identical facts, the Supreme Court held that a rent repayment order could only be made against the immediate landlord under the tenancy generating the rent. A superior landlord was out of reach.

That is no longer the position. Section 40 of the Housing and Planning Act 2016 now allows an order where a relevant offence has been committed by a landlord under a tenancy of housing in England or by any superior landlord. Two further changes matter:

• Under section 44, an order can now cover up to two years’ rent, rather than twelve months.
• Under section 41, an application must be made within two years of the offence.

So occupiers of an unlicensed HMO can now apply to the First-tier Tribunal against the owner directly, for up to two years of rent they paid to somebody else. Our guide to rent repayment orders covers the process.

What happens to occupiers when the rent to rent company fails?

Payments to the owner stop, the intermediary becomes uncontactable, and the occupiers carry on paying into an account connected to nobody managing the building.

The occupiers cannot simply be removed. Under section 3 of the Protection from Eviction Act 1977, it is unlawful to enforce a right to recover possession against an occupier lawfully residing in the premises other than by court proceedings. Changing the locks is a criminal offence.

Section 21 has been abolished. Possession of an assured tenancy now requires a statutory ground under section 8. Ground 8, the serious arrears ground, needs at least three months’ rent unpaid, or thirteen weeks where rent is payable weekly or fortnightly. Grounds 1 and 1A, covering occupation by the landlord or family and sale, require four months’ notice.

Recovering the property from the company is a separate exercise. Because the head lease is not an assured tenancy, ending it is a contractual question rather than a section 8 one. Running that alongside the occupiers’ rights is complex, and the order of the steps affects the outcome. Our guide to evicting a tenant covers the framework.

What due diligence should each side do?

If you own the property

• Run a Companies House search. Check the incorporation date, filed accounts, and whether the directors have a history of dissolved companies.
• Ask for a personal guarantee from a director, and check whether that director has anything worth guaranteeing with.
• Confirm in writing that your lender permits subletting and your insurer covers the intended use.
• Check the licensing position with the council, and inspect at intervals.

If you are an occupier

• Establish who owns the building. The Land Registry title register costs a few pounds and names the registered proprietor.
• Check whether the property is licensed. Most councils publish a public HMO register online.
• Check that your deposit is protected, and by whom.
• Keep every rent payment record. That is what the tribunal works from on a rent repayment order application.

If you run one of these businesses, apply for licensing in your own name where you are the person managing.

How we can help

Osbornes Law acts for owners, intermediaries and occupiers in rent to rent disputes. Our property litigation team advises on possession claims, licensing prosecutions, civil penalties, rent repayment orders, and claims against intermediaries who have taken rent and vanished.

If you have been approached with a guaranteed rent offer, the cheapest point to take advice is before you sign. If it has already gone wrong, our landlord and tenant solicitors can advise on possession. We also act in leasehold disputes where a head lease restricts subletting.

Call us on 020 7485 8811 or fill in the contact form below.