Here is a blog clinic question from Mary (not her real name) who is a landlord:
I have very good tenants who have paid their rent regularly through their bank. There is an assured tenancy agreement which was set up by an estate agent and signed by us all.
I have known that they have run an internet business from my property since they took on the tenancy but it never entered my head that this could be a problem for me.
I have now re-read the tenancy agreement, which states under Tenant’s obligations, “To use the premises only as a single private residence for the occupation of the tenant and not to carry on any formal or registered trade, business or profession there.”
Could I be prosecuted for allowing them to run their business from my property, even if I didn’t know that it could be unlawful?
What should I do now that I am aware of this?
Should I now ask them to agree to a change in the tenancy agreement and conatct the local council?
Does it make my buildings insurance invalid?
Its not a criminal offence to run a business from a rented property, so you not going to be slammed in jail or fined for it (see the difference between criminal and civil law here).
The reason why all tenancy agreements will (or should) prohibit tenants running businesses from the property is that it may be very bad news for you. For example:
- The law which governs business tenancies is different from that which governs residential tenancies. If you allow your tenant to run a business, you run the danger of the law governing your tenancy changing. This could mean that you lose the right to recover possession under section 21. So you could be stuck with the tenants and be unable to get rid of them.
- It will probably be in breach of the terms of your mortgage
- It may, as you say, invalidate your insurance (you need to check your insurance policy)
- You may find that the you are in breach of the planning regulations.
There is nothing wrong with someone having a hobby which earns them a bit of cash. But a proper business should not be allowed.
I suggest you ask them to find separate business premises and stop using your property for this, as it in breach of the terms of their tenancy. If they refuse, say that reluctantly you will have to require them to leave at the end of the term.
You will find some more information on this post here.
When I asked my insurance and mortgage about running a business from home, they had no issue provided there was not a room that was exclusivity used for the business and customers did not visit.
The problem is at the end of the day, what is the different between an employee “working from home” and an independent consultant writing a report for a client while set in their home?
It will be interesting if this is every challenged as being an unfair term and condition in an AST.