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

Real Estate | 21 Oct, 2021 |

In tenancy law, there are some areas that are clear cut, like who has to repair a leaking roof, and others that are, well, spongy. One area that requires a more detailed explanation is the issue of working from home. Obviously, no landlord is going to object if a teacher marks classwork in his living room after school is done. But what if the tenant earns her entire livelihood from the rental property? Could it affect the landlord’s insurance? Devalue the apartment? Is it even legal?

The simple answer is: it depends. Here’s a rundown of what you can expect if you are thinking of running a business from your rental home.

What Does the Lease Say?

There’s no law against running a business from home. According to the Small Business Administration, around half of all businesses are operated this way. And that’s not counting the recent boom in side-gig entrepreneurs who are writing a novel, designing logos or creating cosplay costumes all from the comfort of their own rented apartment.

 The main point here is that, while it’s legal to run a business from home, you must have the landlord’s permission. Your lease or rental agreement will spell out the do’s and don’ts for occupying the property. Always check to see if there’s a clause that prevents you working from home.

 If you are renting a condo unit from the landlord, you’ll also have to abide by the building’s CCRs (Covenants, Conditions and Restrictions). These are often much more restrictive than rental agreements so be sure to ask for a copy before you sign the lease.

 Will You Cause a Nuisance to Neighbors?

If your lease is silent, it doesn’t mean you’re in the clear. Most leases contain a clause that prevents you from causing a nuisance to neighbors and other tenants of the building. A nuisance might be in terms of noise, such as teaching kids to play rock guitar, or it could be due to you receiving a lot of deliveries or visitors. A good example of a business that may cause a disturbance to neighbors is a childminding business because you constantly will be receiving noisy children into the home.

 While a one-man computer-based business is unlikely to cause any problems, a parade of customers entering the building could be a nuisance, a security ,and an insurance issue. In this situation, the landlord may be liable if one of your clients gets injured on the property. If the nuisance is severe enough, it could involve an eviction and a visit to the court house, so bear this in mind.  

How Is the Property Zoned?

The purpose of zoning is to ensure that buildings are used for their intended purpose like residential, industrial or commercial use. To run a business from home, the property must have the appropriate zoning ordinance. Most cities allow small home-based businesses, but the zoning laws may limit the number of employees you can have or whether clients can come to your home. It’s important to check with the city first. 

 Many municipalities require that you register your business, and you might need a license for certain activities and trades. Operating your business without a license can result in penalties and fines. More importantly, it can also violate the lease. Most leases require you to use the property “lawfully,” so if you don’t have the proper business licenses, this could give the landlord a reason to evict you.

 Other Things to Consider

When the lease prohibits a home-based business but the zoning looks okay, your first step is to speak to the landlord. Explain the situation and ask him to confirm in writing that you can run your business from home. As long as you’re a good tenant who pays the rent on time, most landlords could not care less that you’re sitting at the kitchen table, tapping away on a laptop each day!

Even if the landlord is happy to have you running a business from the rental property, there are some other things to consider. When utilities are included in the rental price, the landlord may be wary that the bills could be significantly higher if you work from home. It’s not unreasonable for the landlord to raise the rent slightly or ask you to pay for heating and electricity.

 Another concern is if your business would increase wear and tear to the property. For most types of home business this shouldn’t be a worry – it’s unlikely you’ll damage the property while designing websites or performing translation services, for example. Home-based cosmetology, on the other hand, is less kind to the floor and furnishings as you may be using chemicals to treat nails and color lashes. Make sure you explain the exact nature of your business and be prepared to increase your security deposit to cover any additional wear and tear.

By the way, the real estate industry is represented at MailCon Las Vegas

The Bottom Line

If the lease, CCRs or zoning ordinances say that you cannot conduct business out of your rental apartment, then you must cease and desist. However, it’s unlikely that you’ll encounter too many problems. Many people work at home in this day and age. Local governments are largely sympathetic and your landlord may have a hard time finding a tenant who will not operate some form of home business from home. Being open and honest about the nature of your business will go a long way to ensuring that you get relevant permission and hopefully, run a profitable business from your rental home!

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