It is increasingly common for tenants to seek to work from home, whether by arrangement with their employer or to run their own business. This is a concern for some landlords who fear tenants will gain security of tenure over the rental property.
With the rise of the internet and flexible working conditions more and more people are electing to work from home or run their own businesses from home. This has caused some concern and confusion for landlords in the past who fear consenting to such an arrangement would lead to tenants acquiring security of tenure as business tenants under the Landlord and Tenant Act 1954 (L&T 54).
Security of tenure gives tenants a right to renew their tenancies upon the expiry of any fixed term. This effectively means tenants could have a tenancy for life leaving a landlord very limited grounds to recover possession. Accordingly, legislation was introduced some 4 years ago to assist both landlords and tenants in such a situation. Section 35 and 36 of the Small Businesses, Enterprise and Employment Act 2015 (SBEEA 15) changes parts of the L&T 54 to exclude a residential property used as a ‘home business’ from the security of tenure provisions in the L&T 54.
Where tenants are simply working from home and the use of the property is overwhelmingly residential the L&T 54 would not apply in any event because of the predominantly residential use. However, it is the second scenario, the one where a tenant is running a business from home, that is of greatest concern to landlords. It is this scenario that SBEEA 15 is there to deal with.
A ‘home business’ is defined in SBEEA 15 as ‘a business of a kind which might reasonably be carried on at home’. The supply of alcohol for consumption is specially excluded from this definition. Thus SBEEA 15 permits landlords to grant tenants a ‘home business tenancy’ from 1 October 2015. In order to qualify as a ‘home business tenancy’ the following 3 conditions should be met:
- A tenancy which requires the tenant/one of the tenants where joint to occupy the dwelling house as a home (whether or not as that individual’s only or principal home);
- Which permits a home business to be carried on in the dwelling house, or permits the immediate landlord to give consent for a home business to be carried out in the dwelling house (whether that be a particular home business, or a particular description of home business or any home business), and;
- A tenancy which does not permit a business other than a home business to be carried on in the dwelling house.
As such SBEEA 15 has made it easy for tenants to operate reasonable small-scale businesses from home without landlords fearing any potential consequences. At the current time the courts have not been asked to rule on whether a particular tenancy does or does not constitute a home business so further guidance is hard to come by. However, if a business can be run as an adjunct to the residential use without substantially compromising it then it is likely to fall within the exception created by SBEEA 15.