Can tenants run a business from rented properties?
The way we work has changed drastically over the years, especially in the aftermath of a COVID-19 Lockdown. Many are now choosing to work from home instead of travelling to an office. This can be a concern for landlords, as rented property has some legal implications attached to it when it comes to tenants working there.
This guide goes over the legal implications of tenants doing business in a rented property, and includes some important resources from the Government and other managing bodies. If you still have questions on the topic, we’d love to help, so contact your local branch to speak to us.
Is it legal to run a business from a rented property?
There were previously two kinds of tenancies available to a tenant and landlord: residential and commercial. These were covered by two separate pieces of legislation: The Housing Act 1988, for residential tenancies only, and the Landlord and Tenant Act 1954, for commercial tenancies. However, things are different now. Because some tenants might not fit neatly into one box or the other, maybe working from their living room a few days a week or occasionally taking business calls from home, you have to look at the primary use of the property for guidance.
So, while it is legal for a tenant to work from home, it is slightly more complex than a simple ‘yes’. The property must be, first and foremost, a residential one. In order for that to be the case, it cannot be used for commercial purposes (business or work) for more than 40% of the time.
Can a tenant register a business at a rented property?
Registering a business to a rented property address is a different thing to actually running a business from there. For example, it is quite common for companies to register an office at an accountant’s address, but not actually run the business from there. It is legal to register a business to the address and landlords are advised to discuss concerns around this directly with tenants or through a property management company to make the legal 40% maximum commercial use is being kept to.
What about home offices?
Home offices are more common these days, as most people require a separation between work and home life. For a landlord, the important things to consider here are utility bills. It should be considered as part of the tenancy agreement so that the bills are covered fairly in the rent or paid for separately by the tenant.
Internet access is also important. If a landlord provides it currently, they could consider switching to leaving this up to the tenant to control and pay for, so that it doesn’t affect any insurance if any broadband issues affect a tenant’s business.
Speaking of insurance, landlords should check their policy carefully before agreeing that a tenant can use the property for work. Tenants may also need to check with the local authority that they don’t need to pay business rates for council tax.
What can landlords reasonably refuse?
A landlord can refuse to allow tenants to run a business from home, but only for one of the following reasons:
- Because your mortgage specifically indicates that the property must be residential only. Remember that primarily residential is not the same as residential only. A tenant cannot demand that you change your mortgage to permit a business to be run from the premises.
- You can demonstrate that running a business from home would lead to excessive wear and tear on the property. For most types of home business, this should not be something to worry about, but others may cause concern so discuss the type of business use with a tenant beforehand.
- If the home business would cause a nuisance to people in neighbouring properties. This might be through excessive noise, heavy footfall, or increased traffic.
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We have plenty of online guides to help landlords too, from haart’s Top tips for landlords to a guide on mandatory and selective licensing schemes.