Remote work has changed the way people do business. Just look at how remote work has transformed real estate! So, it should come as no surprise if your tenant wants to run a business from their rental property. You shouldn’t, however, say, “Yes,” without stipulations since a business run out of your rental property can open you to liabilities. However, with proper negotiation, you can grant permission to your tenant and maybe even encourage them to resign their lease. Here’s what you need to know!
Can a tenant run a business from a rental property?
Yes, tenants can usually legally operate a business from a rental property. The nature of their business may be constrained by some factors.
- The type of business it is.
- Zoning laws and regulations.
- Explicit lease stipulations that prohibit some if not all businesses from being run out of the rental property.
What are the risks of letting your tenant run a business in a rental property?
The liability that comes with permitting a tenant to run a business out of their rental property depends on the nature of the business. If it’s an eCommerce business where hardly any inventory is kept on your property, then there’s minimal risk. However, other companies are riskier.
- Personal training.
- A distillery.
- A repair shop run out of your garage.
These are types of businesses that demand greater interaction with the county or even city ordinances. For example, if clientele pick up goods or receive services on your property, there’s a greater risk of injury or property-related litigation. If the business eats up utilities, then bills could significantly go up, noise could become an issue, and there could be increased wear and tear.
How can you reduce your liability as a landlord if your tenant runs a business from their rental property?
Free rental lease agreement templates provide landlords the opportunity to impose limitations on what kind of businesses, if any, may be run out of your rental property. Fees may be included to offset any liability, as can insurance requirements and stipulations about getting the proper permits and certifications. It’s a good idea to consult with a lawyer so that you don’t encounter any surprising landlord liabilities.
In addition to disqualifying certain types of businesses, you can also have a survey to determine potential areas of conflict.
- What is the business’s intent?
- What are the inventory needs?
- What are the hours of operation?
- What will be the client or customer interaction on the rental property?
- Will parking be necessary for customers or services?
- How many employees will be working on the property?
- Where will the work be done on the property?
- What tools or equipment are necessary for the business?
Bottom Line
A tenant running a business out of their rental property doesn’t have to be an issue if you set the terms. And permitting your tenet to run a business may be what it takes to keep them paying rent on time and occupying your unit. Just make sure to lay out the consequences, like early lease termination, to keep everything running smoothly.
