Can I sell my house to my son and rent it back?

Selling your house to your son and renting it back can be an appealing option for various reasons, such as releasing equity, managing finances, or simplifying the inheritance process. However, this arrangement involves several legal, financial, and personal considerations. This comprehensive guide explores the feasibility, advantages, disadvantages, and legal implications of such an arrangement in the UK.

1. Understanding the Concept

1.1 Definition

Selling your house to your son and renting it back means transferring ownership of the property to your son while continuing to live in the home as a tenant. This involves a formal sale process followed by a rental agreement between you and your son.

1.2 Common Scenarios

  • Equity Release: Parents may want to unlock the value of their property without moving out.
  • Inheritance Planning: Simplifying the inheritance process by transferring the property to the next generation.
  • Financial Assistance: Helping a family member with their financial situation or managing care costs.

2. Legal Considerations

2.1 Transfer of Ownership


  • Valuation: Obtain an independent valuation of the property to ensure a fair sale price.
  • Conveyancing: Engage a solicitor for the legal transfer of ownership. Both parties should have independent legal advice to avoid conflicts of interest.
  • Stamp Duty: Consider the implications of Stamp Duty Land Tax (SDLT), which may be payable on the transaction depending on the sale price and other factors.

Key Points:

  • Independent Advice: Both you and your son should seek independent legal and financial advice.
  • Market Value: Selling below market value can have tax implications.

2.2 Rental Agreement

Creating a Tenancy:

  • Tenancy Agreement: Draft a formal tenancy agreement outlining the terms of your tenancy, including rent, duration, and maintenance responsibilities.
  • Landlord Obligations: Your son, as the new landlord, must comply with all legal requirements for landlords, including health and safety regulations, deposit protection, and periodic inspections.

Key Points:

  • Legal Compliance: Ensure the tenancy complies with the Housing Act and other relevant legislation.
  • Tenancy Type: Decide whether it will be an Assured Shorthold Tenancy (AST) or another type of agreement.

3. Financial Implications

3.1 Tax Considerations

Capital Gains Tax (CGT):

  • Sale of Property: If the property is your principal residence, CGT may not apply. However, your son may incur CGT when he sells the property in the future if it is not his primary residence.

Inheritance Tax (IHT):

  • Gifting Property: If you sell the property at a significant discount, it may be considered a gift, potentially affecting IHT calculations. The seven-year rule applies, where gifts made seven years before your death may be exempt from IHT.

Income Tax:

  • Rental Income: Your son will need to declare rental income on his tax return and may be liable for income tax.

3.2 Financing

Mortgage Considerations:

  • Existing Mortgage: If you have an existing mortgage, it will need to be paid off upon sale. Ensure your son has financing in place if he needs a mortgage to buy the property.
  • Buy-to-Let Mortgage: Your son may need a buy-to-let mortgage, which typically requires a larger deposit and has different interest rates and terms compared to residential mortgages.

4. Benefits and Drawbacks

4.1 Benefits

Financial Flexibility:

  • Equity Release: Access the equity tied up in your property without needing to move.
  • Inheritance Planning: Simplify the transfer of assets and potentially reduce IHT liabilities.

Family Support:

  • Housing Stability: Continue living in a familiar home while ensuring it stays within the family.
  • Assistance: Your son may be better able to manage the property and provide support.

4.2 Drawbacks

Potential Conflicts:

  • Family Dynamics: Financial arrangements can strain family relationships. Clear communication and formal agreements are essential.
  • Legal and Tax Complications: Navigating the legal and tax implications can be complex and costly.

Loss of Ownership:

  • Control: You lose control over the property and must abide by the terms of the tenancy agreement.
  • Future Security: Your son’s financial difficulties or other unforeseen events could affect your housing security.

5. Practical Steps

5.1 Planning and Preparation

Seek Professional Advice:

  • Legal Advice: Consult with a solicitor to understand the legal implications and ensure all documents are correctly drafted.
  • Financial Advice: A financial advisor can help assess the tax implications and financial benefits or drawbacks.

Property Valuation:

  • Independent Valuation: Obtain a professional valuation to ensure a fair market price for the sale.

5.2 Executing the Sale and Rental Agreement

Sale Process:

  • Conveyancing Solicitors: Engage separate conveyancing solicitors for you and your son to handle the transfer of ownership.
  • Sale Agreement: Draft and sign the sale agreement, ensuring all legal requirements are met.

Rental Agreement:

  • Tenancy Agreement: Draft a detailed tenancy agreement outlining rent, maintenance responsibilities, and other key terms.
  • Deposit Protection: If a deposit is taken, it must be protected in a government-approved scheme.

6. Long-Term Considerations

6.1 Maintaining the Property

Responsibility for Repairs:

  • Landlord Duties: Your son, as the landlord, will be responsible for major repairs and maintenance.
  • Tenant Duties: As a tenant, you may be responsible for minor repairs and upkeep.

6.2 Financial Monitoring

Rent Adjustments:

  • Review Rent Periodically: Ensure that rent is reviewed and adjusted periodically to reflect market rates or changing financial needs.
  • Tax Compliance: Your son should keep accurate records of rental income and expenses for tax purposes.

6.3 Future Changes

Plan for Changes:

  • Circumstances: Be prepared for changes in circumstances, such as your son’s financial situation or your own living needs.
  • Legal Review: Periodically review legal documents to ensure they remain relevant and compliant with current laws.

7. Case Studies

7.1 Case Study 1: Equity Release and Family Harmony

Background: An elderly couple sold their home to their son at market value and rented it back. This allowed them to release equity and simplify their financial affairs while continuing to live in their home.


  • Professional Advice: They consulted solicitors and financial advisors to ensure the transaction was fair and legally sound.
  • Formal Agreements: They drafted a detailed tenancy agreement to outline their rights and responsibilities.

Outcome: The arrangement provided financial security and maintained family harmony, with clear communication and mutual understanding.

7.2 Case Study 2: Inheritance Planning

Background: A single mother transferred ownership of her property to her son as part of her inheritance planning. She continued to live in the home, paying a nominal rent.


  • Legal and Financial Advice: She sought advice to understand the tax implications and structure the transaction effectively.
  • Tenancy Agreement: A formal tenancy agreement was established to protect her rights as a tenant.

Outcome: The arrangement facilitated a smoother inheritance process and provided clarity on property ownership, reducing potential disputes.


Selling your house to your son and renting it back is a viable option for many UK homeowners seeking financial flexibility, inheritance planning, or family support. However, this arrangement requires careful consideration of legal, financial, and personal factors. By seeking professional advice, understanding the implications, and maintaining clear communication, you can ensure a successful and mutually beneficial arrangement.

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