Renting A House For Business Purposes | Can I Do It? Is It Worth It?

  • By: Peter Parker
  • Time to read: 6 min.
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Renting out a house is rewarding, however, there are some risks as well.

The landlords are often worried about tenants doing something illegal from their property, which may end up causing trouble for both the landlord and the tenant.

Tenants running a business out of their residential property is an issue that worries most landlords. 

Landlords are often left wondering whether it is legal to run a business out of a residential property, could renting out a house for business purposes devalue the property or affect the mortgage, and what procedures to follow to rent out a house for business purposes. 

There is no straightforward answer to most of these questions as the local laws of your city and the regulations of your housing complex determine whether renting a house for business purposes is allowed and how it affects the value of the property. 

With home-based businesses booming in the country, it is significant to know the rights of a landlord as well as the rights of a tenant concerning running a business from a rented property. 

Can you run a business from a rental house?

Yes, you can run a business from a rental house. But there are some guidelines and stipulations you must follow. 

Get permission from the landlord

If you intend to run a business from a rental house, it is advisable to discuss the issue with the landlord first as many rental leases prohibit tenants from starting a home-based business.

You must have the written permission of the landlord to start a home business from a rented property.

If your lease document prohibits business activity, you can be evicted for violating the terms and starting a home business.

It is always advisable to speak to your landlord and get the lease altered or get written permission to start a business from a rental house. 

Secure permission from the housing association

You may also have to secure permission from your housing association.

The application letter for the permission must possess details such as 

  • The details of the business such as nature of business, operating hours, number of employees,  etc.
  • Requirements for extra constructions such as sheds, workshops, etc. 
  • Information about commercial vehicles used for business purposes
  • Advertisements and signposts that are required in and around the premises
  • Information about any structural changes to the property

Check the Codes

To make sure that your home-based business does not face any legal trouble, it is essential to check the zoning laws, home-based business ordinances, and business licensing laws. 

  •  Consult your area’s land use department to know the zone your rented property falls into. Generally, areas are zoned as residential, commercial, and mixed-use. If the property falls in a residential zone, you can request a waiver from the zoning authorities to start your home-based business. 
  • The next step is to verify the local area ordinances for home-based businesses. Going through these ordinances can provide you with specific information such as the types of business allowed, the number of employees permitted, insurance requirements, signage, etc. 
  • The final step is to check the licenses and permits required to start a home-based business. It is very important to complete the registration process and get the required permissions to ensure that your business is legal. 

Is it possible to run a business from a rental house?

The short answer to this question is yes, it is possible to run a business from a rental house, considering that more than half of the US businesses are home-based. 

The nature of your business determines whether it will be feasible to run from a rental house or not.

If you are planning to start an e-commerce business, freelancing business, etc. that needs no inventory and has minimum footfalls, you can easily run a business from a rental property. 

Some types of businesses that involve huge footfalls, high inventory, or special construction requirements are not fit to be run from a rental property.

For example, if your business involves clients coming in to pick up goods or enjoy the service, there might be issues of high utility bills, increased noise, and property-related litigation. 

Before starting a home-based business from a rental house, you have to check the following requirements- 

1. Infrastructure & Setup requirements:

What additional infrastructure do you need to start the business? Some businesses may require additional workshops, storage space, parking space, etc.

You have to check with the landlord and the housing association if they permit structural changes and additional constructions on the premises. 

2. Legal adaptation requirements:

Getting the applicable registrations and permits is vital to starting a home-based business legally.

It is crucial to check the zoning laws, home-business ordinances, and local business licensing laws before starting the business

3. Nature of business requirements:

The nature of your business can determine whether it can be run from a rented residential property or not.

For example, using too much floor space can breach the landlord’s mortgage agreement, increased footfalls can lead to higher utility consumption and can also cause increased wear and tear to the property, clients moving in and out of your home can cause disturbance to your neighbors, etc. 

Risks of renting a house for business purposes

Renting a house for business purposes can open you to some liabilities. Here are some risks of renting a house for business purposes.

  • Complaints from neighbors if your tenant’s business involves customers moving in and out of the property.
  • Security concerns over a higher number of people visiting the property.
  • High utility bills as the tenant’s business may consume utilities such as electricity, gas, etc. 
  • Property-related litigations if people suffer injuries on the premises.
  • Risk of breaching zoning regulations if the tenant does not get proper permissions before starting the business.
  • Issues with the housing association or the apartment complex as your tenant’s business stress the utilities of the complex. 
  • Increased insurance premiums as the residential property insurance do not cover the damages caused when the property is used for home business.
  • Increased wear and tear to the property. 

How to reduce your liability if your tenant runs a home business

If you wish to allow your tenants to do home business, it is important to consider these measures to reduce your liabilities. 

  • The utility bills can be substantially higher when your tenant runs a home-based business. If the heating and electricity bills are included in the rent, ask the tenant to increase the rent, or else you can ask the tenants to pay the utility bills. 
  • If you provide internet to your tenants, make sure to be clear whether it is for commercial or residential purposes.
  • Check the zoning regulations to ensure that a home business can be run from the property. 
  • Ask to see all the permissions and licenses for the business before granting permission to use your house for business purposes. 
  • Ask the tenant to give a written application stating the nature of business, the purpose of business, working hours, the number of employees, etc. 
  • Ask your tenant to take additional business insurance to cover the damages caused due to running a home business.
  • Ensure that the property will be used primarily for residential purposes and does not change your mortgage terms. 

There are some pros and cons of renting a house for business purposes.

As a landlord, you have every right to refuse permission for a tenant’s home business if you feel it will disturb other tenants or have some genuine concerns about the purpose of the business. 

You can give conditional permission stating that the tenant should move the business to a commercial property once it crosses a certain threshold or prohibits any type of home business from your property.

The rental lease agreement should be very clear on the aspect of tenants using your property for a home-based business and how any disputes on the issue would be resolved. 

If the lease document clearly prohibits home businesses but your tenant violates the lease and starts a business, you can evict them from the property.

However, considering the boom of home business and the many success stories, it will be prudent to consider renting out your house for business purposes as long as it does not disturb other people and is permitted by the zoning regulations and home-business ordinances.