A guide for freelancer tenants
Are you a tenant and a freelancer? If you answer yes to this question, then you need to know your rights. The gig economy is fantastic. The internet has made it possible for people everywhere to run their own business from their home. However, your landlord has rights too.
You need to be sure that your freelancer status will work with your home circumstances. Here is a guide for freelancer tenants by Mackenzie and Dorman on how to navigate being a freelancer tenant.
How freelance tenancies used to be
If you had run your business from your home before 2015, your landlord would need to permit you to do this and offer you a business tenancy. If you didn’t ask your landlord for written permission to run your business, you could be evicted. Offering a business tenancy to you used to be a significant risk for landlords. It required that they provide the right to renewal on expiry of the original term. Part 2 of the Landlord and Tenant Act 1954 meant that landlords were forced to essentially give a tenancy for life.
Blatantly the mobility and flexibility of modern life made this law unworkable. It is thought that one in four people carry out a large proportion of work from home. Therefore, lawmakers needed to respond and give some flexibility to landlords and tenants.
Home business tenancies
From October 1st 2015, the Small Business, Enterprise and Employment Act permits landlords to grant a Home Business Tenancy. No longer is the landlord expected to give a lifelong tenancy. This means the freelancer can trade from home with the permission of the landlord, without significant risk for the landlord. The landlord may require you to take out additional insurances to cover any items in the home that are part of your business.
However, if you are a tenant, you still need to be aware of the different laws and consider which rules apply to you. The new act does not apply to a tenancy that was agreed before the 1st October 2015. Consequently, if you have lived in your property for more than four years, you could still be breaking the terms of your standard residential tenancy agreement by working from home. It also does not cover a periodic tenancy that arises at the end of a term where the original agreement was made before October 1st 2015. This only refers to those homes on an assured shorthold tenancy.
Your landlord is required in law to provide you with the appropriate tenancy agreement. A General Residential Agreement is not enough. There are legal permissions and financial implications of running any business from a property. There are business rates, additional insurances and additional risks in running a commercial enterprise from your home.
What is the legal definition of working from home?
What if you are a tenant that occasionally brings some work home from the office? This is working from home. Also, you could continuously be travelling as part of your work and the only place you can do the paperwork is in the house. Are you using your home as a base for your business? Your company may also allow remote working. You never go to the office and all meetings are done via online video conference. Are you essentially working as a freelancer?
There are obvious cases of working from home. You could be running a nursery, hairdressers or subletting the property as a holiday let. You may have employees that work with you in the address and customers and deliveries are coming through the address. If it were always this clear, then the law would be clear too.
The law is relatively strict. Your landlord cannot offer you an Assured Tenancy Agreement where you receive paying guests or carry on or permit to be carried on any business, trade or profession on or from the property. Under this definition, doing the occasional bit of work from home is permitted, but working remotely from your desk at home would not be.
However, your landlord has some right to interpret your situation and consider the financial and legal ramifications of your business. For instance, if you are a small freelance company that uses a bedroom as an office, you are unlikely to need planning permission, and you would only need standard insurance. You probably don’t attract any customers, additional traffic, omit dust or smells, so you wouldn’t need to change the use of the building. Therefore, your landlord may judge that this freelance work can fall under a home business tenancy agreement.
What does this mean you should do?
As a freelancer and a tenant, you need to be open and honest with your landlord. Your landlord will likely seek legal advice about when residential use of a building becomes business use. It is a complicated grey area, and each situation will need to be assessed differently.
The only thing that is clear under the law is that you must declare yourself as a resident or a business. Renting a residential property and then using it for a company is prohibited under the Housing Act 1988. To counter this, if you live in the property too, then this law does not count, and the landlord can permit the home business.
However, problems begin to emerge when your business grows. If you are a freelancer working from your sofa writing articles and blogs for the internet, you are unlikely to draw a significant amount of change to the way the property works. Therefore, if you live in the home and merely submit work through the internet, you are likely to be okay. However, if you set up an online shop and begin to receive deliveries to your home or a significant number of customers come and go from your home – then you are more obviously becoming a business, even if you live in the property?
Check: would the work I am doing now qualify for different rates, require planning permission or insurances? If you say yes – then you are now living in your small business property, and your landlord will have a problem.
When you declare your home business to your landlord, they will assess if you need a home business tenancy. These are permitted for smaller enterprises. However, if your business starts to grow into a significant concern, your landlord will likely begin to suggest that you are pushing the extent of the law and you need to separate home from work.