An arrangement (e.g. renting a room or granny flat) where each of the following applies:
- the land is used as the home of a person (the principal resident)
- the principal resident has given the occupant the right to live on the land under a tenancy agreement
- the gross floor area of the residential area to which the right relates (the leased area) is not more than 50% of the total floor area of all residential areas on the land
- the occupant uses the leased area for residential purposes and has not given the right to occupy any part of the leased area to another person under a tenancy agreement
- the rent payable for the leased area is not more than the market rent for the area.
It is not an allowable letting if the leased area is in a building containing 3 or more flats and the leased area is not used for residential purposes by the principal resident.