Landlord could be liable to a lifetime tenancy if a tenant is carrying out a home based business?

by Readers Question

11:21 AM, 18th October 2016
About 4 years ago

Landlord could be liable to a lifetime tenancy if a tenant is carrying out a home based business?

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Landlord could be liable to a lifetime tenancy if a tenant is carrying out a home based business?

I discovered that if you rent your property and the tenant is running a legitimate small business from there (with or without your permission) like a hairdresser or architects practice from the bedroom converted to small office the tenant can obtain a life time tenancy.home business

The rules are something to do with the landlord and tenant act 1954 and that businesses are allowed lifetime tenancies so if they do a business on a residential AST even though the residential tenancy says they can’t, the landlord can be held liable to the lifetime tenancy. All AST’s before Oct 2015 allow the tenants this right but new AST’s after this date cover homeworkers/home based businesses and therefore the landlord is protected from the lifetime tenancy issue.

So my question is does anyone know of any strategies as to what to do if one gets into this awful situation, are there anyways out? Plus if a lifetime tenancy is granted, will the rent be fixed or capped at that rate forever?

Also what happens with the buy to let insurance policy, do they cover tenants who run a business from home like a mother who runs a hairdresser just seeing maybe 2 or 3 clients a day? Obviously there will be a breach of mortgage conditions, but I’m not too worried about that part just now.

Any advice would be appreciated.

Joel


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Comments

Joel Hearne

13:19 PM, 18th October 2016
About 4 years ago

Reply to the comment left by "Neal Craven" at "18/10/2016 - 12:56":

Thanks for the link, it is interesting.

Be nice if a lawyer here could advise what to do if an "informal" business use was agreed by a landlord and now the tenant is after a lifetime tenancy based on business use and no longer a sole residential use.

Thanks

Joel Hearne

16:17 PM, 18th October 2016
About 4 years ago

Reply to the comment left by "Whiteskifreak Surrey" at "18/10/2016 - 13:04":

Hi, under this circumstance you can not get rid of this tenant because they inherit rights. What my question is is what can one do to get rid of such a tenant who is trying to use this piece of legislation to their advantage?

Thanks

Steve Masters

16:22 PM, 18th October 2016
About 4 years ago

Reply to the comment left by "Joel Hearne" at "18/10/2016 - 16:17":

Put the rent up. A Lot!

Joel Hearne

17:35 PM, 18th October 2016
About 4 years ago

Reply to the comment left by "Steve Masters" at "18/10/2016 - 16:22":

I believe the rent can not be increased on the life time tenancy, only increased at market levels and in some instances capped

Mike T

20:50 PM, 18th October 2016
About 4 years ago

Reply to the comment left by "Joel Hearne" at "18/10/2016 - 12:40":

Hi Joel, Can you make it clear as to if you are in this situation or just 'wondering' about it ?
I would in the meantime agree with Romain that IF your tenancy agreement forbids it, then the tenant is in breach of the tenancy. If this was/is the case then ask the tenant to cease or leave.
I have not heard of anyone having a right to a lifetime tenancy EXCEPT for those with a Protected Tenancy - usually domestic/residential ones from pre- ASHT's.
Would be interested to learn otherwise.

Joel Hearne

11:05 AM, 19th October 2016
About 4 years ago

Reply to the comment left by "Mike Amapola" at "18/10/2016 - 20:50":

Hi Mike, when you informally allow a tenant to do a business from your home as well as them doing their main employed work on which you referenced them on, they inherit rights from the 1954 act. So my question here is that if a residential tenancy turns into or becomes a business tenancy (lifetime tenancy) what can a landlord do to get possession?

Home based businesses are very prevalent out there and many landlords could not be aware of the risks.

Michael Holmes

20:12 PM, 21st October 2016
About 4 years ago

My AST agreements all contain a clause preventing a tenant from running a business from their room in one of my HMOs, so I can't see how they can use the 1954 act if they are working under the auspices of later legislation.

Ian Narbeth

12:59 PM, 14th November 2016
About 4 years ago

Reply to the comment left by "Joel Hearne" at "18/10/2016 - 13:19":

I am a commercial property solicitor. If the tenant carries on a business then he may obtain security of tenure under the 1954 Act and could seek to renew his lease repeatedly. The onus would be on the landlord to establish a ground of opposition and even if he does he may have to pay compensation to the tenant.

However the Act does not apply to all tenancies as Romain pointed out. The relevant legislation is s23 Landlord and Tenant Act 1954 the relevant parts of which read:

"Tenancies to which Part II applies.

(1)Subject to the provisions of this Act, this Part of this Act applies to any tenancy where the property comprised in the tenancy is or includes premises which are occupied by the tenant and are so occupied for the purposes of a business carried on by him or for those and other purposes.

(2)In this Part of this Act the expression “business” includes a trade, profession or employment and includes any activity carried on by a body of persons, whether corporate or unincorporate.

...[section 23(3) is not relevant]

(4)Where the tenant is carrying on a business, in all or any part of the property comprised in a tenancy, in breach of a prohibition (however expressed) of use for business purposes which subsists under the terms of the tenancy and extends to the whole of that property, this Part of this Act shall not apply to the tenancy unless the immediate landlord or his predecessor in title has consented to the breach or the immediate landlord has acquiesced therein.In this subsection the reference to a prohibition of use for business purposes does not include a prohibition of use for the purposes of a specified business, or of use for purposes of any but a specified business, but save as aforesaid includes a prohibition of use for the purposes of some one or more only of the classes of business specified in the definition of that expression in subsection (2) of this section."

So if there is a prohibition against business use the tenant does not get LTA 1954 renewal rights unless the immediate landlord or his predecessor in title has consented to the breach or the immediate landlord has acquiesced therein.

Therefore be very wary of "informal" arrangements. They may amount to acquiescence. The AST ought to have a prohibition against business use. The landlord should take legal advice and will probably be advised to serve a section 8 notice.

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