The mobility and flexibility offered by advancements in technology have made working from home far more possible. With faster internet access, improved security, mobile devices and remote conferencing available it is estimated that around one in four people now carry out some of their work from where they live. A tenant can get Tenants contents insurance but if your tenants have a job where they work from home, this can have repercussions on you as a landlord.
Read more: Landlord insurance: A beginner’s guide
Impact for landlords
If landlords are forced to give a tenant a Business Tenancy, as stipulated in Part 2 of the Landlord and Tenant Act 1954, this can, in certain circumstances, give a tenant a right to a renewal tenancy upon expiry of their term, effectively giving a tenancy for life.
Legislation changes have now helped landlords and tenants with this problem.
Home business tenancy
The Small Business, Enterprise and Employment Act allows a landlord to grant a ‘Home Business Tenancy’ and prevents a tenant from gaining a lifelong tenancy. This applies to any new Home Business Tenancy granted from the 1 October 2015 in England and Wales except:
a tenancy which is entered into on or after 1 October 2015, pursuant to a contract made before that day; or
a periodic tenancy which arises at the end of the term where the original tenancy was before 1 October 2015 (where the tenancy is an assured shorthold tenancy).
What qualifies as Business Use?
By law, a Residential Tenancy and a Commercial Tenancy are viewed differently. If your tenant is intending on using the property for business use there are legal permissions and financial implications, such as business rates, that apply. Therefore a general Residential Tenancy Agreement is not sufficient. As a landlord, you need to provide the correct Tenancy Agreement. A Commercial Tenancy Agreement also affects the cover provided for the property under a landlord insurance policy. The added risks involved in running a commercial enterprise means that a standard insurance policy does not provide sufficient cover. But what qualifies as commercial use?
Definition of working from home
It may seem obvious on what constitutes working from home, however the activity involved can vary widely and can be viewed differently in the eyes of the law. Some examples may include, the tenant:
Occasionally bringing work home from the office.
Constantly being on the road and bringing back paperwork to do at home – using it as a base but not a registered business.
Using the property to run a sole trading business.
Having employees or partners also working with them and customers and deliveries coming to the address.
Running a full business like a nursery, hairdressers or renting the property out as a holiday stay.
In the first two examples, tenants qualify for a Residential Tenancy. Points five and six are classed as businesses use – but what do examples three and four qualify as?
Assured Tenancy Agreements
The majority of Assured Tenancy Agreements include clauses that prevent some uses, and may be worded similarly to: “Not to receive paying guests or carry on or permit to be carried on any business, trade or profession on or from the property.”
Depending on the nature of the business the tenant is running they may be legally liable to obtain planning permission and pay business rates. Without this, not only will they be breaking their Tenancy Agreement but your insurance may also be void as business activity is not permitted under a standard insurance policy.
If a tenant is running a small freelance company using one bedroom and the activity doesn’t attract any customers, traffic, dust or smells, it is likely planning permission isn’t required. Each situation should be judged independently and it may be prudent to seek legal advice to determine if the property should be classed for business use. If so contact your insurer to discuss the implications this has upon your insurance.
COVID-19 Information: insurers during this period of lockdown do not expect policyholders to contact them about doing office type work from home if they are normally office based. Whether a tenant, homeowner or a landlord, insurers are being more lenient during this crisis period and automatically granting this cover if it’s not already in place. If any other form of business use is now being operated from the property address, this should still be referred to the insurer for approval.
Alan Boswell Group is one of the country’s leading landlord insurance brokers and current holders of the ‘General Service Supplier of the Year’ award from the Landlord & Lettings Awards. If you’d like some advice or a free quote for your landlords insurance contact their dedicated landlords team on 01603 218000.
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