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Can a tenant run a business from my property?

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For landlords, the question of whether tenants should be able to run businesses from the rental home can be tricky. But with the rise of the gig economy, it’s one many property owners will need to consider.

Can a tenant run a business from my property

The number people who are self-employed has grown rapidly since the 2008 financial crash, to almost 5 million. Many of this number will be freelancers working from home. This change has significantly altered the way people split their time between work and leisure – and the way in which they use their homes.

Things were much simpler last century. Unless they lived above a shop, people tended to go out work – or stay home and not work. As a result, there were two kinds of tenancies (residential and commercial) covered by two separate pieces of legislation: The Housing Act 1988, which covered residential tenancies only, and the Landlord and Tenant Act 1954, for commercial tenancies.

As the workplace has changed, landlords are often faced with decisions about what type of work is permitted on their premises. Is a freelance designer with a computer and drawing board in the spare room ok? What about someone in sales who stores samples in a garage or hallway? Or a home-based hairdresser with callers coming to the property, and the public liability which that entails?

On the question of whether a tenant can run a business from their rental home, the law is quite clear – and in general the answer is yes, they can.

Provided the property remains primarily residential (which means that at least 60% of it is used as their home), the tenant can use it for business. But the tenant must have your permission in writing first.

As the landlord, you may refuse, but only for one of these reasons:

1. Because your mortgage specifically indicates that the property must be residential only. Many mortgages will say that the property must continue to be primarily residential, this is not the same as residential only. The tenant cannot demand that you change your mortgage in order to permit a business to be run from the premises.

2. If you can show that the result of running the business would lead to excessive wear and tear on the property, you may be able to decline.

3. If the business would cause a nuisance to people in neighbouring properties. This might be through excessive noise, heavy footfall or increased traffic.

If your tenant approaches you about running a business from the property, you should consider the nature of the business, and whether it will have a detrimental effect on the property and local area.

You should also make sure that the tenant has their own public liability insurance, if they are providing a service.

Think too about who is currently responsible for paying utility bills, the tenant or you? If you pay the bills, you might want to request an increase in rent to cover the additional cost on condition of granting permission.

And if you are responsible for providing internet access, think about transferring responsibility to the tenant, so that you are not held liable if broadband issues impact on their business.

You should also check your insurance policy before agreeing as the property may only be covered for residential use. If an incident occurs at the property as a result of business use, your insurance claim may be refused.

If you’re new to buy-to-let, there’s certainly a lot to think about. For peace of mind call Assetgrove. We can take care of many of your landlord responsibilities for you, and our Guaranteed Rent Scheme provides you with a fixed g income for up to five years.

Neil Jennings

Neil background is in marketing and business development and has over 20 years experience in the field. He runs Asset Grove and is involved in the marketing strategy for most of our campaigns.

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