Our new monthly ‘Advice Clinic’ series shares the answers to questions our landlords have been asking. This month in our Advice Clinic, Marc von Grundherr, Lettings Director, explains the facts about tenants working from home.
This is a question landlords often ask us as working from home is becoming so common. In fact, according to the Office for National Statistics, nearly 14% of the UK workforce now works from home. Homeworkers already make up a large market for landlords and with changing work patterns, types of employment and new technology, this figure is likely to increase further as more tenants wish to work from home at least some of the time.
This isn’t a problem as such but landlords should put some specific questions to tenants who ask permission to work from their rental property.
First, the landlord should ask exactly what the work involves. Is it full-time or part-time? Is it mainly computer based? Does it involve clients visiting the property? They should also find out what type of equipment or technology the tenant will be using at the property.
It is important to find out if the tenant is simply working from home, which should be quite straightforward, or if they are actually running a business in which case legal permissions may need to be obtained – this could be planning permission or maybe business rates could apply. Running a business is quite different to working from home and these complex legal issues need to be addressed, so it is something we would not recommend.
There has been some clarification for landlords recently on tenants who work from home and the appropriate type of tenancy agreement that is needed. The Government recently passed new legislation in the form of Section 35 of the Small Business, Enterprise and Employment Act 2015. Previously, landlords who gave permission for a tenant to work from home could inadvertently create a tenancy under the Landlord and Tenant Act 1954 which could give the tenant an automatic right of renewal under Part 11 of the Act.
The new legislation overcomes this potential problem by creating a Home Business Tenancy meaning the tenant occupies the property as their home but is allowed to operate a home business from the property. As a result, home working (except a business associated with the supply or sale of alcohol), is allowed using an Assured Shorthold Tenancy under the Housing Act 1988. This makes life easier for landlords as a Home Business Tenancy will be automatically excluded from the Landlord and Tenant Act 1954. Landlords who are unsure of the type of tenancy agreement they will need should ask advice from their letting agent or solicitor.
Most professionals who work from home will mostly be sitting at a desk using a laptop so if the landlord is happy with the type of work that will be carried out and they have checked out which type of tenancy agreement is appropriate, the next step is to inform their mortgage and insurance companies. If the property is furnished, there may only be limited contents insurance covering the hard furnishings so the tenant will have to arrange their own insurance for any equipment. The tenant may also need to arrange for additional phone lines or cabling to be installed – this will be at their expense. Broadband speed will probably be very important to them too so the landlord might find it useful to check out the property’s broadband speed on one of the several websites available.
Finally comes the subject of wear and tear. Until April 2016 landlords could claim a Wear and Tear allowance each year of 10% of the rent they received. This has now been replaced with the ‘Replacement Furniture Relief’ which means that landlords will be able to deduct the actual costs of replacing furnishings in the property. This could be a positive step for landlords whose properties experience more wear and tear as the tenant works from home and is there most of the day as now they can claim a deduction for the actual cost of replacing furnishings.
There are several issues for landlords to consider if a tenant asks permission to work from home. We haven’t experienced any problems though and usually the process is quite straightforward. In fact, it does offer an important advantage for landlords in that it makes a rental property more appealing to tenants and so ensures it lets more quickly. If a landlord has any queries, we suggest they contact their letting agent for advice.
If you are thinking about letting your property, call us on 020 7435 9681 for further advice and information.
View all posts by Marc von Grundherr