Can tenants run a business from rented properties?

Can tenants run a business from rented properties?

Is a tenant running a business from your property? Or just working from home? Landlords should know the legal and practical implications of home-based working in rental properties. Some uses may breach tenancy terms, affect insurance, or require planning permission. 

This article covers: 
• What counts as “running a business” from home 
• How home working differs from a home business 
• Landlord considerations: legality, wear and tear, complaints 

People are working from home much more 

The way we work has changed drastically, especially in recent years. Many people are now working from home instead of travelling to an office, either on a permanent basis or several days a week. This can be a concern for landlords, as rented property has some legal implications attached to it when it comes to tenants working there. 

There were previously two kinds of tenancies available to a tenant and landlord: residential and commercial. These were covered by two separate pieces of legislation: The Housing Act 1988, for residential tenancies only, and the Landlord and Tenant Act 1954, for commercial tenancies. However, things are different now. Because some tenants might not fit neatly into one box or the other, maybe working from their living room a few days a week or occasionally taking business calls from home, you have to look at the primary use of the property for guidance. 

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.