Running a business from a rented property

When you’re in the early stages of getting a start-up idea off the ground, running a business from home is a great way to cut costs and get going.

But while starting a business from your own property is pretty straightforward, what happens if you’re a tenant looking to run a business from a rental property or council house?

The good news is that it’s completely legal to do so – however, there are several very important steps you’ll need to follow before you can start. In this article, we’ll explain how to:

1. | Get written permission
2. | Make an agreement with your landlord
3. | Decide how business bills will be paid
4. | Work out whether you’ll need to pay business rates
5. | Get home-based business insurance

We’ll also provide information on finding the right workspace for your business when you feel the time is right to run it away from your home.

Click the links or read on for all you need to know about running a business from a rental property…

1. Get written permission

Before starting your business, the very first thing you’ll need to do is get written permission from your landlord. This will simply entail contacting your landlord and asking him or her to permit you, in writing, to run a business from their property.

In both cases, you should take a look over your tenancy agreement beforehand – but don’t be dismayed if yours expressly prohibits you from running a business from the property.

You can still ask for permission anyway; this just means that, if permission is granted, your agreement will need to be changed and re-signed.

Remember, if you’re found to be running a business from the property without having gained permission, you’ll likely be in breach of your tenancy agreement which – as you probably know – could have some unfortunate consequences.

If your landlord refuses permission for a reason you don’t believe is valid, try giving them a call or arranging a chat to talk them through your business, and explain why it should be acceptable.

If your landlord still won’t grant permission and doesn’t have a reasonable explanation, get in touch with your local authority to see what can be done about the situation.

2. Agree on the finer points with your landlord

If there’s something about your business that worries your landlord, it may be that he/she grants permission but asks for a compromise on your part. For example, they might permit you to run the business as long as:

• You hold meetings elsewhere to avoid congestion on the street
• You only use certain equipment and materials in a particular place, such as the garage or shed
• You only work within certain hours
• You pay to repair any damages or wear and tear caused by the running of the business yourself

3. Decide how any additional bills will be paid

Importantly, you’ll need to consider how much your bills are likely to increase as a result of running the business from home.

While the mere act of being at home all day instead of out and about will boost your energy bills, certain business operations can lead to specific and significant increases; for example:

• A hairdressing business might require lots of extra water
• A catering business may use a lot of gas (it might be possible to get a better deal with a gas price comparison as on this page
• A business that uses a computer could boost electricity bills

If you pay the bills yourself, you shouldn’t need to discuss this with your landlord (though you will need to prepare yourself for the additional cost).

However, if your bills are included in your monthly rent, you and your landlord will need to decide how they are to be covered.

It may be that he or she chooses to raise your rent slightly to cover the additional cost, or asks for an additional payment each month to cover the difference. Just keep your eye on the numbers here, as you don’t want to be overcharged.

4. Work out whether you’ll need to pay business rates

For the most part, owners of home-based businesses won’t need to pay business rates on top of their council tax. However, you may need to pay them if:

• You use a significant portion of the property for your business
• Your customers come to the property to buy or receive the products or services you sell
• You’ve made changes to the property to accommodate your business
• Your property is both residential and commercial – for example, if you run a shop and are renting the flat above it
• Your business employs other people who also work at the property

Find out how to calculate your business rates with our guide.

5. Get home-based business insurance

As with any business, big or small, in order to run a start-up from home you’ll need business insurance.

You can find a comprehensive list of the insurance policies you’ll need to consider for your home-based business here – but in general, the following policies are often key:

• • Public liability insurance: You’ll likely need this if you come into regular contact with your customers – for example, if they visit you at your home.

• • Product liability insurance: This could be important for you if you sell products.

• • Professional indemnity insurance: If you deal in providing specialist expertise or skills to clients, this is a key cover to have.

• Building and contents insurance: It’ll likely serve you well to be covered by this if you keep a lot of stock or expensive equipment at home.

Remember, when it comes to buildings and contents insurance, chances are your landlord will already have it on the property; so be sure to ask them what exactly is covered under the policy.

Similarly, it may be that the nature of your business requires you to get a particular license before you can operate legally. You can use the government’s license finder tool to work out whether or not your business needs to be licensed.