Residential Landlords have long been concerned about tenants who work from home. There has always been a worry that by permitting the operation of a business the landlord will inadvertently create a tenancy under the provisions of the Landlord and Tenant Act 1954 and the tenant will then gain the automatic right of renewal provided by Part II of that Act.
The Government has reacted to this concern by passing section 35 of the Small Business, Enterprise and Employment Act 2015. This creates a new definition of a “Home Business Tenancy”. This is any tenancy under which the tenant is required to occupy the rented property as a home and is also permitted to run a home business from the property. A home business is defined as any business which can reasonably be run from home but specifically excludes any business for the sale or supply of alcohol. Where a tenancy is a Home Business Tenancy it will automatically be excluded from the Landlord and Tenant Act 1954 and will count as a tenancy of a single dwelling for the purposes of the Housing Act 1988. The Housing Act 1988 already permitted some home working as long as the tenancy was substantially for the purpose of providing the tenant with a home. As a result all forms of home working will now be possible and those tenancies will fall within the Housing Act 1988.
However, that does not mean that everything is now okay. While there may now be no issue from the landlord’s perspective in relation to home working there are other parties to consider. Mortgages, superior leases in flats, and insurance policies all routinely have clauses requiring home use only and prohibiting business use of the property. Depending on how these are worded permitting business use by the tenant, even as a home business, may not in fact be an option for landlords. The changes also do not apply to any tenancy which exists before the new provisions come into force, which they have yet to do, or which are renewals of tenancies which existed before the provisions came into force.
Therefore, while this is a sensible change which is welcome it will be of no effect unless it is taken up by, notoriously conservative, mortgagees and insurers. Hopefully, the government will take steps to encourage changes in their terms to allow this in future.