More and more people are working from home these days and so it is bound to come up where a tenant will be running a business from a rental property.
This raises questions for investors about the legal implications and risks of allowing a tenant to Start a Business and Run a business from your rental property or apartment.
If you have some questions and concerns regarding this issue, you’ve come to the right place.
We are going to cover a few key points to consider before making the decision to allow a Business Owner to run their business from your Apartment or rental property.
Is it legal for a tenant to run a business from a property they are renting?
There is no straight yes or now answer to this question because it all depends on the type of business and the zoning laws and regulations.
Most of the time, tenants can legally run a business from a property they are renting.
However as mentioned above, there are some scenarios where it can cause trouble:
The property is not zoned for certain types of businesses.
Lease terms prohibit tenants from operating a business out of the rental property
The tenant is not running a legal business
If the house is in a HOA (homeowners association) neighborhood that prohibits running a business from a rental property or prohibits certain types of businesses
What are some of the risks for allowing tenants to use a rental property as a business?
The risks can vary widely depending on the type of business the tenant is running.
If the tenant is running an online business that doesn’t require the storage of inventory or customers visiting the property, this is a pretty low risk business venture.
However, if the tenant allows customers to visit the property to pick up products or services, the chances of a customer being injured while on the property increases.
This can lead to more risk for litigation against the landlord.
Here is an example of a type of business that is commonly run from home and some of the possible risk involved:
Say your tenant is running a small mechanic shop out of the garage of the property he is renting from you.
He parks several customer cars on the streets, has customers coming and going throughout the day, and makes noise.
Neighbors could start to complain about the parked cars, noise, and high traffic caused by the business.
Furthermore, if the neighborhood has HOA, it could lead to fines and notices from the homeowners association.
Lastly, there is the possibility for a customer injury onsite which leads to other possible legal issues.
As you can see, risk is all dependent on the nature of the business.
How can I protect myself as the landlord?
Adding a strict “no business use” section to your lease or having terms regarding the type of business the landlord can help is useful in mitigating future issues.
If you choose to allow tenants to run a business from the rental property, it is recommended that you require the business owner to purchase their own business insurance and register their business with the required city or county business license.
Should there be any litigation, this will help shift the responsibility from the landlord to the tenant.
Conclusion
At the end of the day, the decision is yours whether or not you want to allow a business to be run from your rental property.
If you choose to allow this type of use, just make sure you are clear about your expectations and have everything in writing.
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