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Can A Tenant Run A Home Business?




Generally speaking, it is not illegal for your tenant to run a business from home. However, a tenant’s home business brings up some tenancy issues that the landlord cannot afford to ignore. In fact, it might be within your rights to disallow such a business if you feel that its implications might violate some tenancy terms or local laws.

Ensure Tenant Complies With Zoning Laws

The tenant’s business may be alright by you as a landlord, but could still be in violation of the local zoning laws. In that case, you should be on the safe side and ensure that your tenant complies with such laws, otherwise you might end up having to deal with legal liabilities for your negligence. You can have the tenant move the business to the right zone or even apply for a waiver, called “variance”, to exempt them from the zoning restriction.

Fortunately, many authorities are recognizing the significance of home businesses and making laws that put to rest landlords’ concerns about home businesses being operated by their tenants. Additionally, these laws may allow home-businesses but put restrictions on how such business should operate.

For instance, loud businesses may be prohibited in a residential zone, as well as home businesses that reach a certain threshold in terms of employees or clients. Other than that, your tenant needs to get a license for the home business they are operating, or at the very least have it registered with the local authorities.

Insurance Coverage Issues For Tenants Home Businesses

Otherwise, as the landlord, you will need to discuss with the tenant how the insurance terms change based on the home business. As a residential property, your insurance will generally not cover any damage resulting from the property being used as a business premises.

In fact, you may even find yourself liable to other residents and members of the public if some form of personal damages accrue to them as a result of the home business one of your tenants is running. Furthermore, in order for your insurer to protect you against any potential damage that the home-business may cause, you might need to pay increased premiums if you don’t make the tenant pay for the added coverage.

Ensure The Tenant Has The Relevant Insurance For A Home Business

A tenant running a home business needs to have the appropriate insurance cover because your typical insurance will not cover liabilities that occur within your property as a result of a home business. Such insurance should cover issues such as the tenant’s clients getting injured in your property or stock getting damaged.

Basically, when a tenant operating a home business gets the right insurance, issues such as fire, damage to electronic property, personal accidents, product and public liabilities issues can cease being your problem, as should be the case since your property is insured as a private residential property.

You Can Prevent The Running Of Home Businesses

If a particular home business might be a serious bother to other tenants, increase the wear and tear to your property and so forth, you can put a stop to it, whether or not this is covered by the lease. For instance, teaching music lessons from a residence might form adequate basis for eviction even if the lease is silent on home businesses as long as the classes bother other residents.

Still, you can even have some conditional terms for the operation of the home business. For instance, telling your tenant that once the business grows to a certain level, the tenant will have to find another place from which to run it. Actually, if your rental agreement is drafted right, it should comprehensively cover such a scenario and help resolve conflicts that may arise through a tenant operating a home-based business. You can even prohibit all businesses through the lease agreement, even if they do not cause a bother to other residents or affect the property in any way.

In fact, many local laws will let you evict tenants who violate a lease agreement. However, with statistical estimates indicating that 50% of all businesses in the U.S are operated from home, you will have a hard time renting out all your residential properties to tenants who will not operate some form of home business or another.