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What are the legal ramifications of a tenant running a business from a rented property?


By Mark Dawson, Senior Partner at AST Assistance

The COVID-19 pandemic drastically moulded the working landscape. For many workers, it introduced the possibility of working remotely and to others, the chance to run their own business. Often, such ventures would be operated from their rented domicile, which can bring legal complications.

Property legislation in the UK governs a tenant’s rights to use the property for personal use, but if one wishes to run a business one must first be aware of their rights. Failing to adhere to them could result in legal ramifications.

As a landlord, it is vital that you understand your rights and responsibilities, and consider the pros and cons of allowing your tenant to run a business from your property. If you discovered that your tenant is running a business from the property, or they wish to do so, read the guide below by the experts at AST Assistance to know your options.

A background to rental property types

Prior to the COVID-19 pandemic, there were two distinguishable rental property types: residential and commercial.

The ramifications of home and hybrid working, alongside a rise in individuals running businesses from their rented accommodation, have changed the legal definitions of rental property types. In tandem, the rights and responsibilities of tenants wanting to run a business from a rented property have changed.

As such, landlords and tenants must understand their rights before a business is begun to be run from a rented property.

Can a tenant legally run a business from a rented property?

Yes – but not always. Firstly, one must look at the primary use of the accommodation, specifically, whether it is being used solely to run a business, or if the tenant is living there whilst working at the property sporadically, such as a couple of times a week.

In order for it to be legal to run a business from rented accommodation, it must primarily be used for residential purposes. For this to be true, it cannot be used for business purposes over 40% of the time.

Landlords must also be aware of their insurance obligations when a tenant wishes to run a business from their property. Most standard insurance policies will not cover commercial activity, so it is vital that landlords check the terms and conditions of their policy before permitting a tenant to run a business. If such an event occurs and the business is found to be operating without the landlord’s knowledge, they may not be covered for any damages or losses that may occur as a result of this.

If you permit your tenant to run a business from your property, the tenant must check with the local authority that they do not need to pay business rates for their council tax.

The use of a property can only be changed with the correct planning permission in place. To change the use of the property from residential to commercial, planning permission would be required from the local authority. Depending on the type of business being run, listed building consent may also be required.

Can a tenant register a business at a rented property?

Registering a business at an address where it is not primarily being run is commonplace, such as the business’s accountant’s address. It is therefore legal for a tenant to register a business at a rented property.

However, discussions should always be made with the landlord prior to doing so, in order to maintain the threshold of business operations below 40%. Any doubts about registering should be discussed with the tenant, and the legal rights of doing so should be understood prior to registering.

Can I refuse my tenant’s request to run a business from my property?

There are a few reasons why you may not want your tenant to run a business from your property, but few are legal grounds for annulling their request. You may refuse in such cases:

  • Your mortgage explicitly states that the property is for residential use only. Primarily residential use is not the same, and your tenant cannot force you to change your mortgage to allow this.
  • You can prove that running a business would result in excessive wear and tear to your property. If this is a concern, speak to your tenant about the intended uses.
  • You have reason to believe that the business would disrupt the individuals in neighbouring properties. Common examples include excessive noise and increased traffic.

What to do if your tenant wishes to use your property for business purposes

If you have concerns about your tenant’s right to use your property for business purposes, you should discuss them with specialists in tenancy laws. It is imperative that both parties understand their rights before a business is registered and run from a rented property, or risk facing legal consequences.

This article has been provided by Mark Dawson, an expert with over twenty years experience providing help for landlords with related services.


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