Can tenants run a business from rented properties?

Many people now work from home more regularly, but when it comes to running a business from a rented property, the rules are not always straightforward. Landlords and tenants must understand the legal limits, mortgage restrictions, and insurance implications before agreeing to any business activity within a rented home.

Is it legal to run a business from a rented property?

Yes - tenants can sometimes run a business from a rented property, but certain conditions must be met.

Historically, residential and commercial tenancies were treated separately under:

• The Housing Act 1988 (residential tenancies), and
• The Landlord and Tenant Act 1954 (commercial tenancies).

However, UK law now recognises that some tenants use their homes partly for work. To remain primarily residential, no more than 40% of the property’s use should be for commercial activity.

This means working from home occasionally is fine, but using a property primarily as a business premises (for example, a shop or salon) would breach tenancy and planning rules.

Can a tenant register a business at a rented address?

Registering a business to a rented property address is a different thing to actually running a business from there. For example, it is quite common for companies to register an office at an accountant’s address, but not actually run the business from there.

It is legal to register a business to the address and landlords are advised to discuss concerns around this directly with tenants or through a property management company to make the legal 40% maximum commercial use is being kept to.

What About Home Offices?

Home offices have become increasingly common since the COVID-19 pandemic. Working remotely as an employee is usually fine and does not count as running a business from the property.

Landlords should consider the following when tenants use part of the home as an office:

• Utilities: Agree on how internet, electricity, and heating costs are managed.
• Insurance: Check that the landlord’s property insurance covers occasional business use. Tenants may need additional business insurance for their equipment or liability.
• Council Tax vs Business Rates: In most cases, home offices are still classed as residential for council tax. If the space is used mainly for business, the local authority may apply business rates.

Landlords should check their policy carefully before agreeing that a tenant can use the property for work. Tenants may also need to check with the local authority that they don’t need to pay business rates for council tax.

What Can Landlords Reasonably Refuse?

Landlords can refuse business use in certain situations, including:

1. Mortgage Restrictions – If the landlord’s mortgage states that the property must remain residential only. “Primarily residential” does not mean fully residential, but landlords cannot be forced to change their mortgage terms.

2. Excessive Wear and Tear – If the business activity could cause damage or additional maintenance costs.

3. Disturbance or Nuisance – If the business would create noise, foot traffic, or parking issues affecting neighbours.

For example, an online consultancy business may be acceptable, but a home-based dog grooming or catering business could be refused due to higher risk and disruption.

We have plenty of online guides to help landlords too, from haart’s Top tips for landlords to a guide on mandatory and selective licensing schemes.