In the wake of Covid, working from home is now more common than ever. Alongside this, more and more people are actually choosing to run their business from home. In a mortgaged or privately owned property, this comes with a fairly straightforward set of rules. But things get a little more complicated when it comes to running a business from a rented property. There are questions that both the tenant and the landlord need answering before your business can get up and running.
Here we look at the ins and outs of running a business from home, looking at the primary concerns of both tenant and landlord.
A quick nod to tenants working from home
This article is about running a business from a rented property. This is not the same as a tenant working from home, employed elsewhere. Home offices are common now, but, as long as this home working arrangement doesn’t use more than 40% of the rented space, there are no special concerns.
It’s good practice for tenants to let their landlord know that they work from home, as a courtesy. In most cases, tenants are responsible for all of their own utility, phone and internet bills, so this doesn’t impact the landlord. There is an argument for renegotiating rent if bills are included in the rental price if a tenant works from home.
Can you run a business from a rented property?
The short answer to this question is, generally, yes. But that’s with caveats.
As a tenant, you must first notify your landlord of your wish to run a business from the property and ask for their permission. Historically, landlords were usually dissuaded from granting permission, making it very difficult for tenants. However, the Small Business and Employment Act (2015) made it more straightforward.
The legislation makes it harder for landlords to say ‘no’ to “a business of a kind that might reasonably be carried on at home”. There is no set list of businesses, so it can be considered to be quite broad, certainly most desk-based roles. This extends to business owners, such as electricians, builders and beauticians having an office within the home in which to do their administration.
Can you childmind in a rented house?
One type of business which doesn’t fit neatly into office-based work (for which many landlords will say yes) or machinery-based or practical work (for which many landlords will say no), but which is a common business to run from home, is childminding.
Again, the tenant must ask permission of the landlord if they wish to childmind from a rented house. The rental agreement may need changing. To register as a childminder, you will usually need written permission from your landlord if you are in a rented house.
There are important considerations which you will need to factor in. Childminding uses much of the house and you may need to make adaptations to make the premises safe for children, such as stair gates, and other safety features. It’s important that you check with your landlord that they are happy with you making these alterations.
If you are considering running a childminding business with two or more childminders together, you must explain this to the landlord and also seek planning permission from the Local Authority.
Does my landlord have to say yes to me running a business?
No, there are many conditions on which your landlord can reasonably refuse the request from a tenant to run a business from a rented property.
When a landlord is considering whether to allow a tenant to run a business from a rented property, they usually have some legitimate common concerns. There should be no change to the look of the property, for example, large signs or outdoor work structures. They are often concerned about an increase in visitors to the property, with worries over damage to the property and impact on neighbours in terms of increased noise.
Within the context of these concerns, a landlord is more likely to say ‘yes’ to one type of business and ‘no’ to another. It needs to be addressed on a case by case basis and should the landlord give permission, it’s for that business type only.
If the landlord is content to give permission for you to run the business from the rented property, then you can expect them to revisit the tenancy agreement. You will likely be required to take out business insurance. It will also be your responsibility to find out if there will be changes to council tax or if you are liable for business rates.
Should I allow my tenant to run a business from a rented property?
Again, there’s no fixed answer to this. It will depend on the tenant, the property, the neighbourhood and your relationship to date.
You can ask for details of the business and what will be involved and make a decision from this point. If you are satisfied to give consent, then it’s important to confirm the agreement in writing. Here you can establish any requirements or restrictions. You may ask for confirmation of business insurance and require that steps are taken to prevent the business damaging the property. You may wish to also increase the frequency of property inspections.
You may find it helpful to seek advice from your lettings management company about the issues you should consider about a tenant running a business from a rented property. You will also need to look at the terms of your mortgage and check it doesn’t stipulate that the property only be used for residential purposes. It may also be necessary to check your local council’s zoning restrictions.
Can you register a business to a rented property?
Not all businesses need to be registered. If you earn under £1000 a year there’s no need to register. Sole traders only need to register for Self-Assessment Tax Returns and everything about the business is linked to the individual, not a company as such. It is more complex for partnerships and limited companies. Limited companies must be registered with Companies House and have unique responsibilities.
If you would like to register your business to a rented property, you again need permission from the landlord. Where the landlord says no, you can register your company to a virtual address instead.
Can I rent my own property to my business?
If you are considering this then you are probably in a situation where it is prudent to seek dedicated tax advice, as renting your own property to your own business is usually done for tax reasons. It is possible and legal, but there should be a formal lease agreement.
We offer a range of landlord services. If you need advice, please get in touch on 020 8699 6778.