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Can a Tenant Run a Business from My Property?

By: Sarah Clark (ILEX) - Updated: 17 Oct 2017 | comments*Discuss
 
Tenant Business Planning Permission

It’s estimated that around one in four people now carry out some of their work from home, due to the way the working environment has changed in the last decade or so.

Most British households have Internet access and a personal computer or laptop, making it much easier to work from home full or part time, but there are obviously pitfalls for landlords who rent out a residential property to someone and the tenant decides that they want to use it for business as well as residential use.

What is Business Use?

A residential tenancy and a commercial tenancy are different in law, so if your prospective tenant is likely to carry out their business from your property, your general residential tenancy agreement isn’t going to cover them to do so. It must also be one or the other type of agreement, it can’t be a residential tenancy with ‘a bit of business use’ – there are legal and financial implications from using a residential premise as to carry on a business.

Legislation supports the distinction between the two - The Housing Act 1988 excludes business tenancies - and the Landlord and Tenant Act 1954 doesn’t apply to residential tenancies. Unfortunately, though, with advances in working practices the different situations that a tenant could find themselves in don’t always slot neatly into one or the other.

Common sense would dictate that when you’re deciding whether a tenancy is a business or as residential tenancy, you’d look at the main use – so if the tenant uses the property as a home but also works from the spare room occasionally, it’s a residential tenancy. However, the Court of Appeal ruled a few years ago that a tenancy which had started off as a business use tenancy, but had changed to become just a residential one was still covered by the Landlord and Tenant Act 1954. In another case, a doctor rented a flat and asked the landlord for specific permission to practise from there, although he had separate consulting rooms apart from the residential premises. It was decided that this wasn’t a business tenancy but it might have been if he didn’t have the separate consulting rooms.

When a Tenant Works from Home

There are several situations that might require a tenant to work from home;

1. They might bring work home from the office sometimes;

2. They may work on the road – a salesman for example – and bring paperwork back to do, using the premises as a base but not a registered business;

3. They could be working remotely for a business based somewhere too far away to commute;

4. They may run a sole trading business from home;

5. They may be running a multi-person business from home, taking deliveries and collections, seeing customers and storing stock;

6. They may be running a Bed and Breakfast, a Nursery, or even letting the property out as a holiday home!

The first two situations are clearly residential tenancies – many people have to take work home sometimes. Again, it’s also pretty obvious that situations 5 and 6 are businesses – but where do you draw the line on situations 3 and 4?

Assured Tenancy Agreements

Most standard Assured Tenancy Agreements contain clauses that prohibit some uses, and the clause should read something like:"Not to receive paying guests or carry on or permit to be carried on any business, trade or profession on or from the property." – If it’s clear that your tenant is seeing clients at the property or using the property as a business, they may be in breach of their agreement.The reason for a clause like this is that if a tenant runs their business from your property, it needs to have planning permission and they need to pay business rates. If there’s no planning permission and the tenant isn’t paying the correct rates, the tenant is legally liable, but it will be you as a landlord who gets chased first by the authorities.

The property is likely to need planning permission if:

  • The property is no longer mainly a private residence;
  • What it’s being used for is considered unusual in a residential area;
  • The tenant trades to the public from the premises;
  • Using it as a business might impact on traffic or cause a nuisance with people calling at the property
  • The use is likely to create excess dust or smells.
  • Practically speaking, many people freelance from rented properties. However to err on the side of caution, I would advise that you consult your landlord and also the local planning department.

Freelance Tenants

Clients who work freelance are likely to work from home as standard – so what’s the situation if, for example, your tenant is a freelance writer working from a spare bedroom? As far as planning permission is concerned, running a home-based freelance writing or IT business isn’t likely to impact with more traffic or visitors, so it’s not likely to cause too much of a problem.

If your tenant is a freelance hairdresser or beauty therapist however, the situation is slightly different, as there will be more people, traffic and potential parking problems.

All of these situations are subject to legal definition and if there was a dispute it would be judged on its merits, so if you’re in any doubt as to whether to let your property to a freelancer or allow them to carry on business from home, seek professional legal advice.

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[Add a Comment]
LiiLii - Your Question:
I want to run a daycare from my home, but my landlord says his insurance doesn't cover it. What can I do? Am I able to get my own insurance

Our Response:
Has your landlord given permission to run a business from your home? You may wish to check your tenancy agreement first to see whether there is a restriction on this.
ThePropertyLandlord - 17-Oct-17 @ 3:48 PM
I want to run a daycare from my home, but my landlord says his insurance doesn't cover it. What can I do? Am I able to get my own insurance
LiiLii - 17-Oct-17 @ 12:45 AM
Hi, I am a tenant looking to start a catering business from my home kitchen. I do not have to make any changes to the propert and my landlord does not have any objections. Does the landlord need to check with his mortgage ( buy and let) company that it does not violate their terms? Thanks in advance!
Taurussaz - 13-Oct-17 @ 2:51 PM
@WZstx - I'd be inclined to report them to the housing association as this isn't legal.
Neil - 5-Oct-17 @ 2:28 PM
Homeowner in residential area in a small Close with limited parking and access. Housing association tenant nearby has turned her front bedroom into a waxing/nails/beauty parlour and front room into a hair dressing salon with professional chairs and other hair and beauty setup - it is advertised on Facebook. Wouldn't be so bad except she and her boyfriend are neighbours from hell with loud foul-mouthed parties until 3am in the summer, and customers parking in the limited parking slots, with her boyfriend parking his tipper truck in the access road to garages occasionally to spite their neighbours. She herself allows her daughter's car to park blocking off access to facing garages in the residential garage block served by the access road, at the end of which are three parking spaces allocated to two properties. Would the housing association be able to relocate them to a more appropriate location? The only alternative is probably to shut them down but since these people are violent and rude when contacted, which has intimidated us all into silence, it is probable that they would take serious revenge.
WZstx - 4-Oct-17 @ 4:08 PM
If you start a small fudge business from a rented property will this effect the owners insurance? The fudge would be sold else where and no customers would be calling to the property. Thanks in advance for your help.
Suz - 24-Sep-17 @ 5:16 PM
I rent my property to a very good tenant but I have learned that she has converted the spare room into her treatment room for her beautician business. I have no issue with it but I know in her tenancy agreement it says she can't conduct business from the property. Is there anything that I have to change or get a copy of (maybe her insurance) to ensure she and my property is protected. I don't want to lose her as a tenant but obviously I don't want to be left liable for anything?
Janine - 6-Sep-17 @ 4:32 PM
@George - if people are coming and going then yes, this is effectively a business. I'd also want to know what type of films he was making (if you know what I mean).
NicG - 4-Sep-17 @ 3:17 PM
Hi, I am looking to rent my 3 bed flat out to a film maker.He wants to use a couple of rooms as an editing suite but also rent out the main room as a studio sometimes.I am happy for him to do this, but do I need a business license etc for him, Thanks, Georgina
George - 2-Sep-17 @ 7:00 PM
Hi I rent my property out it's SN assured tenancy ,I think the tenant is running a business from my house who can I report this to
Fran - 11-Aug-17 @ 8:54 PM
Jimena - Your Question:
Hello, we want to rent a house, and we want to run a proper business. Do we have to ask for any license or is just to have an agreement with the landlord? Thank you

Our Response:
You would have to ensure your landlord is aware and agrees to your proposal. With regards to having a licences, much depends upon what sort of business it is you wish to open.
ThePropertyLandlord - 10-Jul-17 @ 2:46 PM
Hello, we want to rent a house, and we want to run a proper business. Do we have to ask for any license or is just to have an agreement with the landlord? Thank you
Jimena - 8-Jul-17 @ 4:36 PM
Lee - Your Question:
Iam a homeowner and my neighbours are housing association tenants where one seems to be running a business from home as a gardener. When she does jobs she brings the garden waste home dumps it on the road in order for it to be collected by the council. I also keep getting random knocks from strangers as our door numbers are similiar and she has posted the address on facebook. Also for parcels. I have two small children this worries me

Our Response:
Much depends upon whether the association allows tenants to run a business from home - you would have to check the terms and conditions of your tenancy agreement. Also, you can complain directly to the housing association if your neighbour is causing a disturbance. Fly tipping is an offence and your neighbour could be charged for this, please see link here.
ThePropertyLandlord - 26-Jun-17 @ 3:40 PM
Iam a homeowner and my neighbours are housing association tenants where one seems to be running a business from home as a gardener. When she does jobs she brings the garden waste home dumps it on the road in order for it to be collected by the council. I also keep getting random knocks from strangers as our door numbers are similiar and she has posted the address on facebook. Also for parcels ... i have two small children this worries me
Lee - 25-Jun-17 @ 5:13 PM
@Freddie - the best thing to do is just ask the landlady to sort it out. If you don't ask..........
Jan - 19-Jun-17 @ 10:50 AM
I have been living in a rental property for 10 months, I have now learned that the previous tenant officially registered/ran her (failed) business at the property for two and half years, she has also continued to use my property/address for the past 10 months via mail redirection/interception.The Letting Agent was aware and did not enforce the terms of the Tenancy Agreement. I have reported this/followed-up ALL of the necessary organisations and progress is very slow.Her personal/financial/Electoral Roll data remains at my address. Is the Letting Agent or the Landlord liable for any direct/indirect losses/costs I have incurred?Can the Letting Agent or the Landlord threaten the ex tenant with legal liabilities, e.g. used the residential property for her registered business and has continued to use my address for all of her business and personal activity? Thanks so much in advance of your guidance.
Debs - 16-Jun-17 @ 7:08 PM
As a tenant, I share a driveway with another tenant, the landlady and another neighbour. The driveway is the responsibility of the landlady and her neighbour.Currently soft vegetation is now encroaching upon the drive, brushing against vehicles, but they seems unconcerned about this.Whether soft or hard vegetation, should those responsible have a duty to ensure clear access is provided.
Freddie - 16-Jun-17 @ 12:15 PM
Char - Your Question:
Can a tenant working for an agency (tutoring) work from a rented property?

Our Response:
Much depends upon the terms and conditions of your lease. I'm sure it would go unnoticed if you had one or two students visiting the house. However, if you had several and were using your sitting room as a classroom and hosting several children at a time, this would be slightly different. Therefore, checking your contract or discussing this with your landlord directly is what you should do next.
ThePropertyLandlord - 15-May-17 @ 12:05 PM
Can a tenant working for an agency (tutoring) work from a rented property?
Char - 14-May-17 @ 1:22 PM
nadia - Your Question:
Hello EveryoneI am living in a rented house. Can I start my own business from that house? I hope if I ask the landlord he will straight away say no. Should I ask him? What law say about this situation?Can anyone answer my question

Our Response:
It depends upon what the business is and what the terms of your contract are. If the business is a proper business (not just working from home on your laptop), then you would have the landlord's permission in writing to allow you to do this.
ThePropertyLandlord - 10-May-17 @ 2:26 PM
Hello Everyone I am living in a rented house. Can I start my own business from that house? I hope if I ask the landlord he will straight away say no. Should I ask him? What law say about this situation? Can anyone answer my question
nadia - 6-May-17 @ 5:46 PM
If i had an Icecream van is this classed as running a business from home
Manners - 4-May-17 @ 11:00 PM
If i had an Icecream van..Selling on the street..And i live in a housing association flat is this classed as running a business from home
Manners - 4-May-17 @ 10:57 PM
Hi everyone, I am starting by own business (cakes, baking) form home. I am renting a flat andI have to ask my landlord for permission. I will be more than grateful, if anyone will help me to create a simple letter and help me to put all info together. This is small business, there will be no clients coming into house, I will have full insurance, food hygine ceryficate etc... If someone have similar situation I will be grateful for help... Please advise me how the letter should look like? Many thanks
March - 26-Apr-17 @ 10:08 PM
@Jollyness - I'd say if you are worried about entering the tenancy, don't. Trust your gut instinct and look for a place where you can guarantee your privacy. Ol.
Ollie78 - 13-Apr-17 @ 1:51 PM
Hi I'm looking to move in to a grade 2 listed property Where I have been allocated some rooms and then there are communal arears. The house has several room and the landlord has now told me that she will be doing b&b from 1 section on the house. They will use my front door and the same hallway as me. Where do I stand? Also the landlady will be doing weddings in the property. Strangers will have access as there is no designated access? And I have dogs. I need to protect them. I'm worried about entering this tenancy
Jollyness - 12-Apr-17 @ 10:52 PM
muppett - Your Question:
I rent my 4 bed detatched house for £1250 but tennants said they want to turn part of outbuildings into a dog kennals.where they get paid for it.i know id need to inform council and they have to pay business rates.however coul I ask them for more rent ? They intimated kennals could bring in about £5k per monthRegards Ray

Our Response:
I advise making sure you are fully conversant with turning your residential property into a business venture before you make any agreement. Firstly, if the overall character of your dwelling will change as a result of the business, then you will need to apply for planning permission, please see link here. Yes, you will be able to ask for more rent as the tenant's contract will have to change - it would be advised to have this agreed and drawn up professionally. However, setting this up will require significant cost and outlay and I suggest you do some more research into this and/or seek some legal advice.
ThePropertyLandlord - 27-Mar-17 @ 10:45 AM
I rent my 4 bed detatched house for £1250 but tennants said they want to turn part of outbuildings into a dog kennals .where they get paid for it.i know id need to inform council and they have to pay business rates .however coul i ask them for more rent ? They intimated kennals could bring in about £5k per month Regards Ray
muppett - 26-Mar-17 @ 9:14 AM
Cath - Your Question:
Hello. I'm currently renting a flat and working full time away from where I live. As a hobby I am a food blogger, and will be starting to host supper clubs & running food stalls, all at external venues away from my flat. I am looking at setting up as a Sole Trader in order to get liability insurance cover etc. I will need to use my flat to prepare and cook food. Where do in stand in terms of tenancy rules around this? My tenancy cotract has a line in stating that the property is for residency only and not to carry out any business or profession! Any help on this would be appreciated. Thanks

Our Response:
If you are using your flat to cook large amounts of food in and it may inconvenience your neighbours in any way i.e deliveries, smells, stock holding and it looks as though you are running a business from your home, then you are over-stepping the mark in terms of your agreement. If your tenancy agreement specifies you are not to run a business from your home, then you will be in breach of it.
ThePropertyLandlord - 22-Mar-17 @ 2:20 PM
Hello. I'm currently renting a flat and working full time away from where I live. As a hobby I am a food blogger, and will be starting to host supper clubs & running food stalls, all at external venues away from my flat. I am looking at setting up as a Sole Trader in order to get liability insurance cover etc. I will need to use my flat to prepare and cook food. Where do in stand in terms of tenancy rules around this? My tenancy cotract has a line in stating that the property is for residency only and not to carry out any business or profession! Any help on this would be appreciated. Thanks
Cath - 22-Mar-17 @ 10:08 AM
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