Sometimes we get questions on the helpline about giving a tenant consent to operate a business from their rented home. This can be tricky because the landlord does not want to inadvertently give the the tenant a business tenancy that could be caught by Part 2 of the Landlord and Tenant Act 1954. A tenancy under those provisions can – in certain circumstances – give a tenant a right to a renewal tenancy upon expiry of their term, effectively giving a tenancy for life.
Amongst the many changes taking place on 1 October 2015, the Small Business, Enterprise and Employment Act 2015 helps landlords and tenants with this problem.
Home business tenancy
Section 35 of the Small Business, Enterprise and Employment Act 2015 essentially allows a landlord to grant a “home business tenancy” and such a tenancy is specifically excluded from any protection under Part 2 Landlord and Tenant Act 1954. This applies to any new home business tenancy granted from the 1 October 2015 in England and Wales except:
- a tenancy which is entered into before 1 October 2015
- a tenancy which is entered into on or after 1 October 2015, pursuant to a contract made before that day; or
- a periodic tenancy which arises at the end of the term where the original tenancy was before 1 October 2015 (where the tenancy is an assured shorthold tenancy).
If a tenancy meets the following conditions, it will be regarded as a “home business tenancy” for the purposes of the legislation:
- a dwelling-house is let as a separate dwelling,
- the tenant or, where there are joint tenants, each of them, is an individual, and
- the terms of the tenancy—
- require the tenant or, where there are joint tenants, at least one of them, to occupy the dwelling-house as a home (whether or not as that individual’s only or principal home),
- permit a home business to be carried on in the dwelling-house, or permit the immediate landlord to give consent for a home business to be carried on in the dwelling-house (whether that be a particular home business, a particular description of home business or any home business), and
- do not permit a business other than a home business to be carried on in the dwelling-house.
What is a home business?
A “home business” is defined as:
a business of a kind which might reasonably be carried on at home.
But, a business is not to be treated as a home business if it involves the supply of alcohol for consumption on licensed premises which form all or part of the dwelling-house.
There are provisions allowing regulations to be made prescribing cases in which businesses are, or are not, to be treated as home businesses. However, at the time of writing there doesn’t appear to have been any regulations made.
Our thoughts as to what businesses could “reasonably be carried on at home” might include:
- Web designer
- Financial advisor
Businesses which might not be suitable could include:
Let as a separate dwelling
Section 36(2) specifically provides that where a home business tenancy is let as a separate dwelling, that is “let as a separate dwelling” for the purposes of an assured or assured shorthold tenancy. What this effectively means is that an “assured shorthold tenancy” can also be a “home business tenancy”. They are effectively the same thing if the tenancy contains the terms mentioned earlier.
A dwelling-house which is let for mixed residential and business use is capable of being let as a dwelling for the purposes of the legislation.
If, a dwelling-house is let together with other land, then, the following applies –
- if the main purpose of the letting is the provision of a home for the tenant, the other land is to be treated as part of the dwelling-house, and
- if the main purpose of the letting is not as a home, the tenancy is to be treated as not being one under which a dwelling-house is let as a separate dwelling.
Guild tenancy agreements
The Guild has chosen to go down the home business tenancy route and the 1 October 2015 update to all our assured shorthold tenancies (and contractual tenancy) are effectively also a “home business tenancy”. However, for the avoidance of doubt, prior written consent from the landlord is required before a tenant may carry on a home business. There is no requirement for the landlord to reasonably consider any request either. Therefore, just as before you can choose whether to allow a home business or not. The good thing is that now, if you give written consent and the business can be reasonably carried on from the home, it will be excluded from Part 2 Landlord and Tenant Act 1954 with no risk of security of tenure.