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Running a business from home in a rental property

There are many benefits of working from home, whether it is cutting your business costs, having more time with your family, or giving yourself more flexibility with your working hours.

But what if you are tenant? Is it legal to run your business from home? Do you need to check with your landlord? What permissions do you need?

In this guide, we explain everything you need to know to start running your business from home in a rental property.

Is it legal?

Although there are some exceptions, the answer is yes.

There are strings attached, the property must remain residential, meaning no more than 40 per cent of its square footage can be used for business purposes. This shouldn’t be a problem for tenants who only use a computer for their work, but on the other hand if your business is selling large items online, the storage of your stock could be a problem.

Check your tenancy agreement

Before you do anything else you will need to check your tenancy agreement, there will be further information there on running a business from your rented property.  

In a standard Assured Shorthold Tenancy (AST) agreement it will normally stipulate something along the lines of:

The Tenant must not use the Property for the purposes of a business, trade, or profession except with the prior written consent of the landlord which must not be unreasonably withheld or delayed. In particular, it will not be unreasonable for the landlord to withhold consent if there is a reasonable likelihood that the use proposed would:

(a) give rise to a tenancy to which Part II of the Landlord and Tenant Act 1954 (business tenancies) applies; or

(b) cause a nuisance to the occupiers of neighbouring properties or significantly increase wear and tear to the Property.

In a nutshell, this means that you will need written permission from your landlord before you can run your business from home. However, since the Small Business, Enterprise and Employment Act 2015 was passed, landlords can only refuse permission if they have a ‘reasonable justification’.

The three main reasons why a landlord could reasonably refuse permission for a tenant running their business from a rental property are:

  1. It would change the property from residential to business use
  2. It would significantly increase wear and tear to the property
  3. It would cause a nuisance to the neighbours

Changing the property from residential to commercial

The landlord can refuse permission if your business effectively changes the property from a residential to a commercial property. This happens when the main function of the property is commercial, rather than being a home. As a rule, when over 40 per cent of the property is being used for a business, it is then considered a commercial property. Another consideration here is that it would also conflict with the landlord’s residential mortgage.

Increase in wear and tear

Another reason permission could be refused is if the nature of the business significantly increases the wear and tear on the property. It is important to be open and honest with your landlord about your business and try to accurately describe what a typical day would look like. This will allow your landlord to give a fair and informed decision when it comes to wear and tear.

Businesses that involve animals, lots of visitors, or the use of pungent chemicals may require some extra consideration from the landlord, for example pet grooming or beauty therapy. Whereas businesses ran from just a laptop and a phone, like a web designer or a PR consultant, are unlikely to be denied.

Nuisance to neighbours

If the business is likely to cause a nuisance to nearby neighbours that is also grounds for having permission withheld. This could be through noise if you are operating loud machinery or playing loud music for example. It could also be through increased footfall or traffic, either people visiting you or if you have lots of couriers collecting and dropping off parcels.

What other permissions are needed?

If you are expecting an increase in traffic you will need to gain permission from your local planning office, even if your landlord already gave you the green light. You will also need to contact them if you trade to the public from the premises or if you will be producing excess dust or smells.

You will need to speak with your local council if you require a new license for the premises.

What else do I need to consider?

Insurance

Before you start running your business from home, you need to make sure that you have sufficient business insurance to cover your contents and property. You will need to speak to your landlord as well to ensure that any insurance policies they have aren’t affected by your business.

Utility bills

Remember that if you are staying at home more, you may see an increase in your utility bills. If you pay for these in your rent, your landlord may want to raise how much you pay.

You may also need to consider your internet package and ensure that you have a generous data allowance if you are having regular video calls or sending and receiving large files online.

Business rates

You may also be subject to business rates when you start working from home, however, this is unlikely unless the property is part business and part domestic (living above your shop for example) or you either sell goods to people who visit your property or you employ people who work at your property.

If you are unsure whether you are subject to business rates, you can find further information on the Government’s guidance on running a business from home.

Working from home best practices

New to working from home? We have written a guide on the best practices including how to stay focused, eligibility for tax relief and maintaining your health and wellbeing.

Read the guide

Homeworker

 

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