You could have a few concerns if you are asked if your tenant can run a business from home. Such as, What are the legalities surrounding this? Is it permitted within your mortgage? Could there be any contributing factors to affect the property’s value? All valid questions that I’ll address in this article.
All of the above questions, including others you might be thinking of, will vary depending on the circumstances. Knowing these legalities, as well as your rights as a landlord is imperative to ensuring you stay legal. As a landlord with a duty of care, you’ll also need to know your tenants’ rights regarding running a business from a rental property.
Is It Legal For My Tenant To Run A Business From Home?
It is legal, yes. But bear in mind, the property will have to remain as a residential dwelling, which means no more than 40% of the property is to be used for commercial purposes.
Most small businesses, such as hairdresser or beauty parlours take up a relatively small space anyway, but make this information clearly stated to your tenant.
Your tenant wants to run a business from home.
Yes, the tenant should have gained consent from you – the landlord – before opening any type of business from the rented property.
This consent should be in writing to protect both parties involved. Due to changes made in 2015 however, a landlord cannot unreasonably withhold permission for a tenant to run a business from their home.
There are three main factors that should be judged, these are the main ones to determine whether you are in a position to be able to decline their request to run a business from home.
- Having to change the type of mortgage you have.
If the tenant running a business from home requires you to have to change the type of mortgage you have, this is reasonable grounds to be able to decline their request.
In this case, you can decline, and the property will have to remain residential premises. Keep in mind that most tenants won’t be approving of your answer, and we’d suggest you make periodic inspections of the property. Ensuring they haven’t started the business against your wishes, as this could still impact the terms set in your mortgage unknowingly.
Worst case scenario, you could face having the property repossessed.
- Noise pollution, or the business being a nuisance to the neighbours.
You’re within your rights to refuse permission for a tenant to run a business from home if you deem it a risk of causing a nuisance to the surrounding neighbours. Examples of nuisance can be very broad, but one of the most common is noise pollution; an increased number of people in a confined area, music, or machinery operating may frustrate the neighbours.
Another common factor of having your tenant run a business from home is the increased footfall in the area posing an issue when it comes to parking requirements. If the area is dense, there are enforced parking restrictions, or the space to park is a pre-existing issue, this’ll only be made worse with the additional people utilizing the business.
- Wear and Tear
Finally, make a judgement on whether the tenant’s business from home will become detrimental to the rate of wear and tear your property will suffer from. If the business is simply computer- and telephone-based with no more than 1-2 people working at any given time, there won’t is much to worry about in this regard.
However, childminding or dog-grooming will almost certainly take its toll on the fixtures and furnishings. A nail salon or hairdresser will mean numerous different people will be in and out of the property and its grounds etc.
Gather the necessary information on the type of business and expected plans moving forward on how the business will operate, this’ll be information to use as a basis for making your decision.
You might come across an example of a business, or circumstance that I haven’t mentioned. You’ll find it valuable to speak with a letting agent, Citizens Advice Bureau, or a legal advisor to get expert advice on how they think you should proceed.
If you’re happy for your tenant to proceed with their business from home in your property, consider these things when you’re drawing up the tenancy agreement.
- If you included bills such as gas and electricity in the rental price, bear in mind that the increased usage within the property will likely make these bills increase. Overcome this issue by getting an agreement by way of a new tenancy agreement, requiring the bills to be paid by the tenant.
- If the internet and/or television services are provided by you under the agreed rent, it could cause an issue, as most suppliers will have individual package types that are provided for both personal, and commercial use. In this circumstance, seek guidance from the retrospective suppliers to get an idea of the agreement already in place, or if anything needs changing. Although as an alternative, it would be simpler to ask the tenants to look to set up and arrange for these contracts for themselves.
As I mentioned before, there are various different businesses that can be run from home, and no two businesses will be exactly the same. If your tenant wants to set up a private nursery, for example, there is legislation surrounding children’s safeguarding, and fire regulations that need to be adhered to. For more complex situations, you should definitely seek advice from a professional or legal representative.