In 2022, over 750,000 new businesses were set up in the UK, many of them from kitchen tables and spare bedrooms. With over a third of the British public living in rented accommodation, this boom in entrepreneurship can cause a headache for landlords.
In this article, we’ll explore whether or not a tenant can legally register a business from your property and what it means for you as a landlord. We’ll also provide advice on what to consider before allowing a tenant to register a business and what to do if you want to stop them from doing so.
Can A Business Be Registered At A Leased Property?
The short answer is yes. However, there are some caveats.
The property should be primarily residential, meaning that no more than 40% of it should be used for commercial purposes. As many businesses are operated from home offices or a single room, this isn’t often a problem. The other stipulation is that tenants need permission from their landlord in writing.
If you don’t want to do this, you do have the right to include clauses in the tenancy agreement that prevent your tenant from running a business from the property, or to place restrictions on the type of business they can operate. However, the law protects tenants from unfair restrictions on their use of the property, and any clauses that are deemed to be unreasonable or unfair may be unenforceable.
As a landlord, you may be concerned about the potential impact of a tenant running a business from your property. However, in most cases, you cannot stop your tenant from registering a business from your property.
Under the law, tenants have the right to use their rented accommodation for any legal purpose, including running a business. As long as the business doesn’t violate any laws, regulations or the terms of the lease, the tenant is within their rights to operate a business from your property. You can only refuse if you can demonstrate one of the following:
- Mortgage limitations: Some buy to let mortgages are residential only. A tenant cannot ask you to change your mortgage to permit a business to be run from the premises.
- Wear and tear: You can demonstrate that running the business would lead to excessive wear and tear on the property. For most businesses, this won’t be the case. If your tenant decides to run a hairdressing salon from the living room, you may have grounds.
- Disruption: If the business would be a nuisance to neighbouring properties. This might be through excessive noise, footfall or parking difficulties.
When a tenant moves out of your property, it’s important to consider what will happen if they’ve registered a business from your property. Here are a few things to keep in mind:
- Review the property condition: If the tenant has used your property for business purposes, the property may be in less than ideal condition when they move out. If the property has been damaged, you may be able to use the tenant’s deposit to cover the cost of repairs.
- Deregister the property: If the tenant has registered their business at your property, you may need to take steps to deregister the property. They will most likely do this themselves, but you can always contact HMRC to expedite the process.
- Consider the impact on future tenants: If the tenant has registered a business from your property, it’s important to consider how this may impact future tenants. For example, if the spare bedroom of the property has been used as a pottery workshop, there may be electrical work that needs to be done before the property can be rented out again.
If you’re considering allowing your tenant to register a business from your property, there are a few things you should consider beforehand:
- Get the appropriate permissions: Depending on the type of business your tenant wants to register, they may need to get permission from the local council or other regulatory bodies. Make sure your tenant is aware of any permissions they need to obtain before starting their business.
- Consider the impact on other tenants or neighbours: If your property is a multi-unit building, it’s important to consider the impact the business may have on other tenants or neighbours. Will it cause any disruptions or noise? Will there be an increase in traffic or parking in the area?
- Insurance: It’s important to make sure your insurance covers any potential damage or liability caused by the business. Your tenant should also have their own business insurance to cover any potential risks.
- Additional wear and tear: Running a business from the property may result in additional wear and tear, which could lead to extra maintenance and repair costs. Consider this when setting the rent and be clear about any expectations for maintenance and repair in the tenancy agreement.
By considering these factors, you can make an informed decision about whether to allow your tenant to register a business from your property. It’s important to have clear communication with your tenant and make sure you’re both on the same page about what’s allowed and expected.
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