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What Residential Landlords Need To Know about the Small Business, Enterprise and Employment Act 2015


What do Apple, Google, Facebook and Amazon all have in common?

Well, apart from being billion dollar companies, they all had humble beginnings. All four of these companies were home start-ups operating out of their founder’s houses, garages and college dorm rooms; and nowadays with the rise of the internet and e-commerce more and more people are following suit by opting to use their own homes as a base to run their businesses as opposed to expensive office suites or warehouse premises.

This has caused some confusion over the years for landlords who have feared that by granting their tenants consent to operate businesses from their homes, they would in turn be seen as granting business tenancies that could be caught under the Landlord and Tenant Act (LTA) 1954. This in turn would give tenants a right to renew their tenancies upon the expiry of their term. This effectively means they would have a life tenancy and a landlord would have limited rights in regaining possession of their property at the end of the contractual term.

Thankfully, new legislation has been brought in to help solve this issue. The Small Business, Enterprise and Employment Act (or SBEEA 2015 for short) was brought into force on 1 October 2015. Sections 35 and 36 of the SBEEA 2015 effectively change parts of the LTA 1954 particularly Part II, to exclude a residential property used as a ‘home business’ from the security of tenure provisions found in the LTA 1954.

 How does it work?

Section 35 of SBEEA 2015 permits a landlord to grant a ‘home business tenancy’ and any ‘home business tenancy’ is specifically excluded from any protection under the LTA 1954. This applies to any new home business tenancy granted from 1 October 2015.

The SBEEA 2015 recognises a ‘home business tenancy’ as a tenancy which meets these 3 conditions:

  • A tenancy which requires the tenant/one of the tenants where joint to occupy the dwelling house as a home (whether or not as that individual’s only or principal home);
  • Which permits a home business to be carried on in the dwelling house, or permits the immediate landlord to  give consent for a home business to be carried out in the dwelling house (whether that be a particular home business, or a particular description of home business or any home business), and;
  • A tenancy which does not permit a business other than a home business to be carried on in the dwelling      house.

What is a ‘home business’?

It is important to know, what is considered as a ‘home business’. Luckily this is defined in the Act as being:

“a business of a kind which might reasonably be carried on at home’. But, a business is not to be treated as a home business if it involves the supply of alcohol for consumption on licensed premises which form all or part of the dwelling house.”

Conclusion

This legislation means that landlords can now rest easy with knowing that they can recover possession of their properties where their tenant is operating a home business, and it is now easier for tenants to be allowed business use of their property under their tenancy agreements.

So if you are a landlord with an entrepreneurial tenant then keep the SBEEA 2015 in mind…and you never know; if your tenant is the next Steve Jobs you might not need to worry about your rental payments ever again!

If you have any enquiries regarding this, or any other landlord and tenant issue please do not hesitate to give us a call on 0113 280 2000 and ask to speak to a member of our Property Litigation Team.  

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