How to Handle a Tenant Running a Business from a Rental
May 30, 2023A tenant running a small home-based business — freelance work, an online shop, consulting — is increasingly common and usually low-impact, but it's worth understanding what's actually allowed under your lease and local zoning before it becomes an issue.
Check whether your lease addresses commercial use
Most residential leases include a clause restricting the property to residential use only, or requiring landlord consent for any business activity — this is your starting point for whether a tenant even needs to ask permission.
Distinguish low-impact from high-impact business activity
A tenant doing remote consulting or freelance design work from a home office has essentially no impact on the property. A business involving regular client visits, deliveries, signage, inventory storage, or equipment is a meaningfully different situation worth evaluating separately.
Consider zoning restrictions
Local zoning ordinances often restrict what kind of home-based business activity is permitted in residential zones — client-facing businesses, certain types of commercial storage, or activity generating regular traffic can run into zoning issues regardless of what your lease allows.
Check insurance implications
Standard landlord and renters insurance policies are typically written around residential use — a tenant running a business, especially one with clients visiting or inventory on-site, may need to disclose this to their renters insurance provider, and you may want to confirm it doesn't affect your own coverage.
Put any approval in writing
If you're comfortable allowing a specific home business, document the approval and any conditions (no client visits, no signage, no exterior storage) in a signed lease addendum, rather than leaving it as an informal understanding.
Frequently Asked Questions
Can I prohibit tenants from running any business from my rental?
Yes, generally — most leases include (or can include) a residential-use-only clause, and you're within your rights to restrict commercial activity, particularly anything involving regular client traffic, signage, or inventory.
Does a tenant working remotely count as running a business?
Generally no — an employee working remotely from home for an outside employer isn't operating a business from the property in the way a lease's commercial-use restriction is typically meant to address. It's specifically tenant-operated business activity that raises the relevant considerations here.
What if a tenant's home business involves clients visiting?
This is a meaningfully different situation from purely remote work — client visits raise parking, noise, liability, and potentially zoning considerations worth evaluating and addressing explicitly, rather than allowing it to develop without any agreement in place.
Do I need to worry about zoning if I allow a tenant's home business?
Potentially — local zoning ordinances often restrict certain types of home-based business activity in residential zones regardless of what your lease says, so it's worth understanding your local rules before approving anything beyond low-impact remote work.
Should I charge more rent if a tenant runs a business from the unit?
Not typically for low-impact activity like remote work, but if the business meaningfully increases wear on the property (foot traffic, equipment, utility usage) it's reasonable to factor that into the lease terms or rent, addressed explicitly rather than assumed.