Thousands of families are trying to make a little extra cash on the side by running small businesses from their homes – but landlords may want to set up a closed shop for the self-employed because of legal risks.
Just over 4 million people are registered with HM Revenue & Customs as self-employed, and most work from home, according to the latest figures from the Office of National Statistics.
That adds up to 14% of the working population. Many more dabble in a business, like trading on eBay or selling arts and crafts.
Running a business from home is not illegal – but opening one in a rented property should come with consent from the owner.
Although landlords often do not want to interfere with their tenants’ lives and income, running a business from a buy to let can have consequences.
Most buy to lets are rented on assured shorthold tenancy agreements that should include a clause that stops the tenant running a business from their home without permission from the landlord.
Not having the permission can cause the property owner difficulties:
- Trading from the property might require planning permission, which is the responsibility of the owner to obtain, not the tenant
- If the business is large-scale, the council may consider switching the home from Council Tax to business rates
- Using the property to store stock, tools or other materials and equipment may void the buildings insurance
- The mortgage lender may not consent to business use, which could breach the loan contract
- Registering a company at a property could lead to problems with credit reference agencies
On top of all that, if the tenant runs a business from a buy to let, the terms of the lease could negate the tenancy agreement and push any repossession proceedings in to commercial rather than residential property law.
One way of checking out business use of a buy to let is searching the address in Google.
If a landlord or letting agent comes across a tenant running a business from a rented home, the action should be treated as a breach of the tenancy agreement, so serve a warning notice asking them to stop immediately.
Should the warning fail, give notice to quit and inspect the property thoroughly to make sure the business use has not led to costly damage or changes.