Running a business from a rented property
Want to start a business from home but you're not the property owner? Use this guide on what to consider to run a business from a rental property
Starting a business from home is a great way to cut costs when you’re in the early stages of getting your business idea off the ground.
However, while it’s straightforward to start a business from your own property, what happens if you’re a tenant looking to run a business from a rental property? Is it illegal? The answer is ‘no’, it’s legal to run a business from a rented property but you’ll need to make sure you follow these steps first…
Get permission from your landlord
The first thing you should do when setting up a business in a rented home is ask your landlord for their permission.
Some tenancy agreements prohibit running a business from home so before you ask your landlord it is worth checking yours so that if they do agree you can get that changed. What’s more, some mortgages do not allow you to use the property for commercial purposes so this is something your landlord will need to change.
In many cases where you are working as a freelancer or online influencer, your landlord should be fine to allow you to operate out of their property as these will not cause any disruptions. If you do not inform your landlord and you are found to be running a business without permission you could be in breach of your tenancy agreement.
You should also account for the fact that different councils have different regulations around running a business from your residence.
It’s worth noting that the law is on your side. In 2015, the government issued new regulations under the Small Business, Enterprise and Employment Act which states that a landlord cannot ‘unreasonably’ withhold permission if a tenant asks to run a business from their property.
Why might a landlord withhold permission to run your business from home?
‘Reasonable’ justifications for a landlord to withhold permission include:
- Causing a disturbance to the people living around you – starting a business as a music teacher might not go down too well if you live in a flat complex with thin walls!
- The nature of your work having a potentially damaging impact on the condition of the property – running a paints business from home could flag up warning signs to a landlord.
- Needing too much floor-space for your work – too much floor-space can see a property deemed as ‘commercial’ rather than ‘residential’, resulting in the landlord breaching their mortgage agreement.
If you rent your property from a housing association you will need to seek permission to run a business from there. Every council may have different rules so it is worth visiting your local council’s website to gauge what their policy is.
You must apply in writing and within the letter include:
- Full details of planned business use
- Details of changes that may be made to the property
- Details of any advertisements or signs that will be put around the building
- Commercial vehicles that may be used
- Levels of noise, operating hours and whether this may disturb your neighbours
- Any planned extra buildings e.g. sheds/outbuildings
Be prepared to compromise with your landlord
Now, all being well, your landlord should agree to you running a business out of their property. But, if they need a bit more persuasion or have any concerns, you need to be prepared to discuss these.
Most home businesses can be run with no more than a computer, internet connection and a phone line but there are certain niche businesses that will require more resource and will impact the running of your business. For example, if you are running a childminder business or are planning to be a car trader, there are factors that could negatively impact your neighbours such as extra noise and cars on the road.
Startups.co.uk forum user Tariawen shared their experience on using a rented home for a business:
“Landlord said it was fine as long as there were no meetings here so I arrange those in hotels or have interviews in offices you can rent out for the day.”
In such cases where your landlord may have reservations there are usually ways you can compromise. For instance, you could promise you will only operate your business out of one room and therefore keep the property primarily residential; meaning no more than 40% of it should be used for commercial purposes your landlord.
If you have a garage or spare room you could even convert this into your work space.
Alternatives if you can’t run a business from your rental property
If your landlord does not agree to let you run a business from your rented property based on reasonable justifications, then you could consider these alternatives instead:
Consider co-working spaces/hiring a desk
Co-working spaces are not expensive and are a great way to connect with like-minded people. Startups 100 winner Hubble is just one of the businesses out there who are offering this service.
Set up a mobile business
Travel to customers and offer your services in their home or offices.
For instance, if you’re interested in beauty you could run a mobile beauty salon. You could look at our guide on how to start a beautician business to get you started.
This is a great option as it is likely to incur less costs, bills and overheads. Plus, you have the added bonus of plenty of space to store your stock and flexibility of working hours.
Be sure to check the opening hours and if they provide essentials like WIFI and meeting rooms.
Not just a space, but a great way to gain resources and learn how to grow your business. Find one near you in our Incubator/Accelerator directory.
Other factors to consider when running a business from home
It is standard practice when running a business from home that you are insured. If you are coming into contact with the general public you may need public and product liability insurance.
If you are running an e-commerce business you will need building and contents insurance and chances are your landlord will have their own insurance on the building so be sure to ask what is covered under that. Make sure you are aware of additional insurance needed for different businesses.
Bills and potential damage
Would your business cause wear and tear to the property over time? If so, perhaps you could agree on how to cover the cost of any damages incurred.
Are bills included in your rent? Then you may have to make allowances for extra costs incurred, e.g. if you run a hairdressing business from home and may use a lot more water on a weekly basis.
Therefore, it is important that your landlord is aware of the exact nature of your business from the beginning so that it doesn’t cause conflict down the line.
Working from home means you can claim certain costs as expenses. For example; if you are using extra water for your car valeting service you could claim for this and if you are using a room in your rented accommodation you may be able to claim back a portion of your rent. Be sure to calculate this first!
Wherever your run your business from, you still must have a physical address and postcode in the UK.
Do you run your business from your rented property? Tell us about your experiences in our forum.