Tenants using the home to run a business – how safe are you?

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The Landlord and Tenant Act 1954 Part II provides security of tenure to tenants of premises occupied for business purposes, or mixed residential and business purposes.

Under the provisions of the ’54 Act, it is possible for a lease or tenancy of a property, used for both residential and business purposes, to be a business tenancy giving security of tenure.  This means that residential tenants working from home could inadvertently be given rights to remain in the premises. This is particularly the risk where no written agreement exists or when it is deficient in some way.

This has long been a concern when letting under the Housing Act 1988 assured shorthold tenancy (AST) when the tenant works from home. Whilst most landlords and tenants are unaware of this anomaly, it is nevertheless a concern.

However, this has been recognised by Government in The Small Business Enterprise and Employment Act 2015 which received Royal Assent on 26 March 2015. The Act consists of a raft of measures aimed at making the UK a good place to start and grow a business.

All good residential tenancy agreements have hitherto prohibited the use of domestic dwellings for business purposes to avoid any potential argument about whether the tenancy is protected by the security of tenure provisions in the 1954 Act.

But, where the landlord knows that a business is being conducted from the premises, it well might be argued that continuation of such practice has been condoned and agreed.

The intention of the 2015 Act therefore is to remove the incentive for landlords to include a prohibition by providing that a tenancy of a dwelling house where a “home business” is carried on will not fall within part II of the 1954 Act.

This is to be known as a “home business tenancy” which will permit the right kind of business for residential premises, a “business of a kind which can reasonably be carried on at home”, but “no other type of business”.

The Act therefore is designed to encourage businesses by giving “greater flexibility around home working” and more options in terms of where the business is carried on and where partners and employees can be based.

What is a home business tenancy?

The Small Business, Enterprise and Employment Act 2015 (SBEE) defines it as when:

• a dwelling-house is let as a separate dwelling;
• the tenant is an individual; and
• the terms of the tenancy require:
  •  the tenant to occupy the dwelling-house as a home;
  • permit a home business to be carried on in the dwelling house, or permit the immediate landlord to give consent for a home business to be carried on in the dwelling house; and
  • do not permit a business other than a home business to be carried on in the dwelling-house.

The Act defines a home as: “any business of a kind which might reasonably be carried on at home”.

Certain specific businesses are excluded, for example, the supply of alcohol, and further regulations are to follow on this.

Until these regulations are finalised and passed by the Secretary of State, expected by April 2016, a degree of uncertainty over this exists for both landlords and tenants as there are many situations where this is unclear. For example:

• The tenant works full time but brings work home regularly
• The employed tenant regularly spends part of the working week working from home
• The tenant is a sole trader making small products at home and sells them
• An employed tenant who runs an eBay business from home storing the products in the dwelling
• An employed tenant who runs an eBay business from home but storing the products elsewhere.
• A self-employed mobile hairdresser who also has clients come to the dwelling.
• A self-employed chiropodist who has clients come to the dwelling.
• A full time employed tenant who runs a consultancy business on the side, uses the home address for his company’s registered office.

There is much ambiguity here that still needs clarification and it is not clear whether a lease of a flat will be included in the provisions, if in any doubt your should get the advice of a solicitor.

It remains to be seen just how many landlords permit their tenants to run home businesses, so caution is recommended here, but as home working in now becoming the norm it is sensible not to lose tents by refusing suitable businesses.

The 1954 Act has provisions for “contracting out of the Act” in the case of all business tenancies, a procedure where the tenant and landlord agree before the lease is signed that the tenancy will be contractual and the security of tenure provisions of the Act will not apply. This is a safe way to go.

If there is any doubt, landlords are at this time recommended to seek a contracting out agreement and you should seek legal advice before letting if you are unsure. See Part 35 of the Act – Exclusion of home businesses from Part 2 of the Landlord and Tenant Act 1954

Small Business, Enterprise and Employment Act 2015 here

View Full Article: Tenants using the home to run a business – how safe are you?

Don’t worry about scaring off landlords with tougher EPCs, JRF chief tells Government

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The UK shouldn’t be held to ransom by private landlords threatening to leave the market due to tougher EPC rules, a senior policy advisor at the Joseph Rowntree Foundation has told a Tory party fringe meeting.

Darren Baxter (main pic, 2nd from right) said that although there needed to be funding available for retrofitting old properties, the government should move very quickly to legislating towards the minimum EPC C.

“If landlords do sell up, I don’t think we should be worried, as landlords sell properties to other landlords or home buyers – you recalibrate supply and demand,” he told delegates.

Baxter clashed with former pensions minister Guy Opperman (main pic, right) who argued that the government should abandon all net zero aspirations in respect of some older houses.

“Landlords will say ‘I have to spend £10-20,000 on a property that brings me £500 a year – I’ll just sell it,” he explained.

“Civil servants are utterly misguided. Shortages will get worse and you’ll get proper poverty in rural communities because people will not even be able to have a rental to start out with. If you exempt all older properties, then landlords won’t have to sell.”

Happier tenants

Opperman told the event – Happier Tenants, More Owners: How can the Conservatives rebalance the housing market for renters and buyers? – that investors could be given a tax break to incentivise building of rental or domestic properties.

He also suggested pension funds should be allowed to build more housing. Opperman added: “We want policy changes – currently councils tend to sell land to the highest bidder so you get poor builds, not long term, or quality housing.”

Watch the whole meeting.

View Full Article: Don’t worry about scaring off landlords with tougher EPCs, JRF chief tells Government

What do you think – sell or rent?

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Hello, We have a leasehold property in London which is unexpectedly vacant.

The letting agent can find a good credit tenant at an increase in rent.

Or another estate agent wants to sell it and quote a good price.

View Full Article: What do you think – sell or rent?

Dreaded water leak – who pays?

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Hello, There are 62 flats in a purpose-built block, which is now getting on.

From time to time there are leaks from communal areas and from pipes under the floorboards in addition to the normal leaks from kitchen pipes and appliances or bathroom furniture and fittings and associated pipes.

View Full Article: Dreaded water leak – who pays?

Scottish housing associations urge rethink on rent freeze law

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The Scottish Federation of Housing Associations (SFHA) is urging a rethink on Scotland’s proposed rent freeze because it will threaten the delivery of social housing.

The SFHA says that without increased government investment, housing associations will not be able to build the affordable homes that are needed to tackle poverty if a proposed rent freeze is implemented.

View Full Article: Scottish housing associations urge rethink on rent freeze law

Updated: new “How to Rent” guide is to be issued soon

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Following recent changes to legislation The Department for Levelling Up, Housing and Communities (DHLUC) is expected to issue an updated version of the renter’s “How to Rent” guide soon.

This is an important document as far as residential landlords and letting agents are concerned because it is one of the prescribed documents that must be issued to tenants at the commencement of their tenancy, and on renewals, in England.

There are three important points here:

1 – Without having issued a guide, landlords or their agents are unable to use the section 21 eviction process – it will fail. Although the section 21 process is likely to be revoked at some point in the near future, though this is not likely until at least well into 2023, it is nevertheless an important legal requirement to issue the guide.

2 – The guide issued must always be the latest available version at the time of the commencement of a new tenancy, or on a renewal. If the earlier version was issued in error then landlords or their agents should follow up with the tenant/s by issuing the later version.

3 – It is important to get proof of issuing the guide, otherwise if the tenant denies having received it a landlord’s section 21 possession claim will fail. The latest version of the guide should ideally be appended to the tenancy agreement and signed for, or an email version sent with its receipt acknowledged.

There have been several new pieces of legislation enacted since the issue of the last How to Rent guide, so new information will most likely be incorporated into the new guide:

1 – The Smoke and Carbon Monoxide Alarm (Amendment) Regulations 2022

2 – Changes to the Code of Practice on Right to Rent Civil Penalty Scheme for landlords and their agents

3 – The Fire Safety Act 2021 (Commencement) (England) Regulations 2022.

Prescribed information when letting

The information you need provide to your tenant/s at the commencement of a tenancy has increased dramatically over the years and has now grown to quite a list. It is vital that you fulfil all your obligations in this regard, timely and accurately, not just because it’s a legal requirement but to enable you to progress a possession claim in the unlikely event you need to do this. These are the things you must do:

1 – Deposits – you must protect any deposit you take in one of the government approved schemes and you must also serve your tenants with the Prescribed Information, all within 30 days of the receiving the deposit.

Prescribed Information for deposits is a specific set of information relating to a tenancy, which landlords are legally obliged to provide to their tenants, which consists of: 

– The amount of the deposit

– The address of the property

– The name, address and contact details of the administrator of the tenancy deposit scheme with which the deposit is held, and

– The name, address and contact details of the landlord and tenants and any third parties who have contributed to the deposit.

Make sure you have proof of service on all these documents, ideally served and signed for at the time of signing the tenancy agreement.

2 – The gas safety certificate – an annual gas safety certificate issued by a Gas Safe engineer must be current and issued at the time of the commencement of the tenancy.

3 – The electrical safety certificate – a five-year electrical safety certificate issued by a qualified electrical engineer must be current and issued to the tenant/s at the time of the commencement of the tenancy.

4 – Energy Performance Certificate (EPC) – a 10-year EPC must be current at the time of the commencement of a new tenancy and issued to the tenant/s.

Other requirements the landlord or agent must fulfil to ensure that a valid section 21 possession claim will not fail are:

1 – Follow the requirements for the vetting of tenants for Right to Rent.

2 – Make sure there is a rental property licence issued by the local authority, where required, or one has been applied for.

3 – Make sure the letting fees ban is being complied with, not to take prohibited fees under these rules or retain a holding deposit

4 – If a notice has been served on the landlord or his agent after a complaint about the property (retaliatory eviction), these complaints must be dealt and the grace period lapsed with before issuing a section 21 notice.

View Full Article: Updated: new “How to Rent” guide is to be issued soon

Divorce and lifetime BTL transfer issue?

admin    Uncategorized     agents

Hi, I would appreciate your help with regard to the lifetime transfer of property to my soon-ex-to-be wife. We are amiable and have agreed on the assets to transfer.

I understand that the flats in question must be transferred in the same financial tax year to be free of capital gains tax

View Full Article: Divorce and lifetime BTL transfer issue?

Agents excluded from The Property Ombudsman scheme

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Five agents that failed to pay a compensatory award have been excluded from The Property Ombudsman (TPO) scheme, it has been revealed.

Because the agents – detailed below – failed to pay, they had been referred to the scheme’s independent Compliance Committee.

View Full Article: Agents excluded from The Property Ombudsman scheme