Mum/dadpreneurs, social media influencers, eBay stores and consulting – the way people are earning money is evolving. While it’s a pretty straightforward matter when a property owner wants to operate a “side hustle” from home, it isn’t so simple when a tenant wants to run a business from their rental.
Not only would operating a business from a rental be likely to breach the tenancy agreement (using the property for business purposes and not purely as a residence), it is also likely to invalidate the landlord’s insurance cover.
Running a business from a rented home greatly increases risks, opening up the landlord’s exposure to loss or damage and even liability claims. This is the reason why many insurance policies exclude cover for properties that house a business.
So, if your tenant’s side hustle could jeopardise your insurance cover, it’s not a decision to be taken lightly. There are plenty of considerations and a need for comprehensive due diligence.
If you are considering giving a tenant permission to operate a home-based business, here are 10 questions to ask when it comes to insurance:
Of course, if you do agree to allow a tenant to operate a business from your residential investment property, the most important question to ask is whether your insurer will continue to provide cover.
Allowing a tenant to operate a business is likely to void an existing landlord insurance policy (there is usually a clause that prohibits the residential premises being used for commercial purposes), but your insurer may be able to offer you other options.
The insurer can advise whether they will extend cover and under what conditions, the type of policy and excesses that are applicable, the conditions for extending cover, and the premium payable to cover the risks.