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Question Title: Business use
| Question: 110 |
| We have a fully furnished property which we wish to let to a lady who is a self-employed beauty therapist. She will also be working from home and wishes to convert the dining room to a consulting room. Our assured shorthold tenancy agreement requires that the property must not be used for business purposes and so presumably cannot be used. What type of tenancy should be granted to her to allow her to work from home ? |
| Answer: |
| You are correct in that an assured shorthold tenancy agreement does not normally allow tenants to carry on business from the dwelling. This clause is inserted for a specific purpose; it is to prevent the tenant gaining protection under the Landlord and Tenant Act 1954 with the rights provided to business tenants.
For the letting to be under an assured or assured shorthold tenancy, the Housing Act requires that the tenant occupies as his main or principle home (Housing Act 1988, s.1(1)b). However, where there is mixed use, both residential and business, the situation becomes slightly more complex.
The nature of the occupation might take any place between the two extremes. Fortunately, from the legal point of view, the statutory codes relating to business and residential tenancies are mutually exclusive. This simplifies things in that it is not possible for the tenant to inherit rights from both codes. Thus the key question is to decide what is the predominant use of the premises, and whether the predominant purpose of occupation is residential or for business use.
The Landlord and Tenant Act 1954 will apply if the predominant use of the premises is, or becomes, business use, or if the business use can be said to be more than incidental. At the other end of the scale, it is well accepted that a tenant who is employed may bring home some work in the evenings without a presumption of business use.
In a recent case (Brewer v Andrews, 1997 - reported in LUJ April 97), the tenants used the rented house where they lived as a guest house. The tenancy was originally granted as an AST, with a clause restricting its use to a single private dwelling house. Because of this, the Court of Appeal held that the purpose of the original tenancy agreement was clear to all parties and that the tenancy should operate under rules for assured tenancies (despite surrounding circumstances indicating a proportion of business use).
The following should be considered when setting up a tenancy where the tenant would like to work from home:
1. Discover the primary intention of the tenant. Do they want the property firstly as a home, with any work performed incidental to the location of the property ? If so, the safest course is to set up a standard residential tenancy with a 'no business use' clause.
2. A declaration in the tenancy agreement that the property is 'let for purpose of a residential dwellinghouse only' may be used in place of a covenant prohibiting business use if this is more acceptable to the tenant.
3. Where the tenant wishes occupation of the property to include a significant proportion of business use it will be necessary to take professional advice and have a suitable business tenancy agreement drafted. This may, however also require 'change of use' permission from the planning department and re-rating of the property for business purposes. All of which will, if applicable, involve both the landlord and tenant in substantial extra cost. |
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References:
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Hyperlinks:
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Letting Update Journal |
Apr 2004 page 16 |
letting-update-journal.html
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Letting Handbook |
Page 6-11 |
letting-handbook-and-factsheets.html
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