By Colin Bates
There are thought to be one in four people working from home. It is not surprising, the flexibility and mobility offered by the internet make it too tempting to work from your sofa. Why would you commute? Just switch on your computer and make yourself a cuppa.
However, if you are a tenant as well as a freelancer, you may be breaching the terms of your tenancy agreement. The law has recently changed to make it more transparent for landlords and tenants alike, but it is still quite complicated.
Before we look too closely at what the situation is now, it is essential to know what the law previously was. The reason for this is because the changes brought about in 2015 do not count for those who signed tenancy agreements with landlords before 2015. It also does not carry over to tenancy renewals after the end of a short term assured tenancy.
The law before 2015 was governed by the Housing Act 1988, which said you could not run a business from home. Equally, the Landlord and Tenant Act 1954 made it clear that you could not live in your business premises. Therefore, if you declared you were running a business from your home to your landlord, you would have to sign a separate tenancy agreement – a business tenancy agreement. This then forced landlords into a challenging corner, as Part 2 of the 1954 act required them to continue to renew the tenancy. This essentially gave you tenancy for life.
Recent moves to a gig economy made this situation untenable. Therefore, there was a change to the law in October 2015. The Small Business, Enterprise and Employment Act permits landlords to grant a Home Business Tenancy. This means the landlord is not forced into a situation where the tenancy must continue to be renewed until you decide otherwise. It also meant the freelancer was complying with the law because they were now permitted to live at the same address as the business they ran.
The Grey Areas
If you are a tenant, you must inform your landlord that you are running a business from the address. This is the only black and white part of all this. However, what constitutes a business within your home is complicated. Where is the line between working at home and running a business from home?
If you bring work home from the office, does this count?
If you travel for your work but need to do the paperwork in your home, is this a business?
If you work remotely from a business that has an office elsewhere, which you rarely visit – are you a home business tenant?
How about if you set up an Amazon marketplace account and you start selling your old junk. You then begin sourcing cheap items around the place that you sell for a profit. When does this become a business?
What if you are a hairdresser that starts doing cuts for friends from your kitchen. Your friends give you a tenner here and there but then start recommending friends, and you put together a pricing policy. Soon you are booking in clients for most hours of the day – all from your back room. When did this become a business?
You might not see the work you do as a business. You might see it as earning a bit of cash. You might think your business is out on the road – but if you are using your kitchen table as an admin hub and receiving business mail to the address – but, are you sure?
What Your Landlord Must Consider
The reason your landlord is so concerned about the tenancy agreement they issue is because of the additional legal and financial implications and risks that come from running a business from an address. You would be surprised at the hoops you have to leap through if you do choose to run a business from your home.
- Do you need planning permission? If your business is going to start getting visits from customers or delivery men; if you’re going to be causing dust or smell – you will likely need planning permission. You are creating a distinct difference to the workings of the neighborhood that impacts on other residents. Even if the impact is increased traffic and the need for more parking, this is enough to warrant permission. You cannot just change the status of a property from residential to commercial without the consent for the council.
- Do you need to pay business rates? The amount of tax you pay for the property could change if you find yourself setting up a business in your home.,
- Do you need additional insurance? Will your landlord need different coverages? You may find that running a business from your home will invalidate any claim you make from your home insurance. This is especially true where you are storing stock in your home. Couriers working for companies such as Hermes are expected to store other people’s items in their garage or a storeroom. While on the property of the courier, the liability for damage or loss lies with them.
As there are so many financial and legal ramifications, your landlord is required by law to provide you with the appropriate tenancy agreement. Therefore, you must ask their permission. They, in turn, will likely seek legal advice about when they can issue a Home Business Tenancy Agreement and when they must issue a Business Tenancy Agreement.
What Does All This Mean?
If you are a freelancer and a tenant, you need to seek advice. It is likely that if you are doing work from your home that does not impact on the neighborhood in which you live that you will be fine. A writer working from the spare bedroom who submits all work via the internet will be hard to discern from the person who commutes to work every day. However, if you are one of the many starting to use the internet to set up an online store – you may need to do your research carefully.