Search for insurance help

Running a business from home as a renter - Facts you must know

Liability Insurance Landlord Insurance Commercial Property Insurance Professional Indemnity Insurance Property Insurance Strata and Body Corporate Insurance Commercial Property Owners Insurance

There is a growing trend toward operating businesses from home. In a December 2020 report, Business.gov shares that there are nearly one-million Australians running businesses from their homes.

There are numerous perks to conducting your business from your home. Flexibility, increased profitability, and a comfortable work environment are a few of the top pros regarding home-based businesses. However, it is critical for those thinking about starting a company to understand that having a business in the home does not free you from regulations and other essential facets of ownership.

The details pertaining to business insurance for home-based businesses can be confusing. In particular, owners of home-based companies are often not aware of insurance essentials for businesses run from a home that is a rental property.

What Tenant’s Need to Know

Government Regulations Regarding Property Used to Run a Business

Entrepreneurs who lease, rent, or own the property they use for their business, be it commercial or a residence, shall meet the following requirements:

Have the opportunity to deduct some property expenses
Report any rental income in a tax return
Pay capital gains tax on profits from the sale of the property
Address any GST obligations and entitlements.

If My Residence Is a Rental, Can I Legally Run a Home-based Business There?

There is no one-size-fits-all answer to questions about running a home-based business from a rented residence. Generally speaking, a rental agreement permits a person to occupy and use a dwelling for residential purposes in exchange for fair value payment.

By definition, running operating a business from a rental dwelling is not specifically illegal. A grey area exists where a landlord and tenant may agree to the use of the rental for a home-based business. However, various elements can influence a landlord’s decision. Details regarding a property’s insurance cover should play a significant part in determining permission to operate a company from a rented residence.

Do I Need My Landlord’s Consent to Run a Business From My Rented Home?

Before you open any type of company in a home that you rent, getting written approval from your landlord is essential. Frequently, operating a place of business from a rented residential property will lead to the termination of a lease agreement. For this reason, permission is vital.

Many at-home entrepreneurs mistakenly believe that running a small company or a ‘side-hustle’ is acceptable even if they rent their dwelling. In some cases, work in areas such as freelance writing, social media influencing, or online consulting goes utterly unnoticed by landlords. However, being unnoticed does not mean that the business has approval.

Voluntary Workers

Voluntary Workers Insurance. Get protection in minutes. Protection for when the unexpected happens

Details Get a quote

Management Liability Insurance

Management Liability insurance is designed to provide protection to both the business and its directors or officers for claims of wrongful acts in the management of the business.

Details Get Quote

Public Liability Insurance

Public Liability insurance is there to provide protection if someone makes a claim against the insured, the business or its employees.

Details Get Quote

Will My Landlord’s Property Insurance Cover My Home-based Business?

With rare exceptions, the insurance carried by the owner of a rented dwelling will not cover a tenant’s home-based business venture. In fact, many insurance policies have specific clauses outlining consequences if tenants are operating companies from their flats or rented homes. A landlord may risk termination of property insurance if tenants breach the terms of the contract. Denial of claims is an additional consequence of such a breach.

Example: Haley runs a small hair salon in her rental flat without the landlord’s knowledge or permission. One of her client’s trips over an appliance cord and fractures her arm. Not only will the landlord’s insurance policy not cover the accident, but the landlord may also lose their insurance or face higher premiums. Additionally, Haley may lose her lease, and she may be found liable for the customer’s injuries.

What Kinds of Business Insurance Should I Consider if I Run My Company From My Rented Home?

There are several types of business insurance policies that can be helpful to you, depending on the type of business you have and other specifics. A Grace Insurance professional can help you tailor a policy to fit your needs.

Here are three kinds of policies that apply to most businesses:

Public Liability – The policy will protect you if you are at fault for a third-party loss in your business.
Asset Insurance – Having asset insurance will protect critical pieces of equipment and inventory
Professional Indemnity Insurance – This insurance covers you if a client sues you for a professional error. Those who offer advice or are a part of the service industry benefit greatly from Professional Indemnity Insurance

What Landlord’s Need to Know

Signing off on a tenant’s request to open a home-based company can be a slippery slope for property owners. There is a reasonable chance that permitting a business or businesses can void the insurance contract. A review of the property insurance and all of the addendums must occur before granting permission to operate a business to a tenant.

Points to Consider Prior to Permitting the Operation of a Business From Your Rental Income Property

If the property has a body corporate, can businesses operate from its residential units?
Will the strata insurance permit operation of businesses?
Is a commercial lease necessary or is the property still mainly used as a residence?
What is the business the tenant plans to run? Insurers, as well as other tenants, will likely view a copywriter or a small virtual design studio differently than a company that runs a daycare or gives tuba lessons.
Will clients and suppliers visit the premises? Visitors to the property increases the potential for mishaps and therefore, the liability.
Will the business cause additional use of resources such as water or electricity? Is the tenant willing to absorb the extra cost?
Does the tenant have appropriate licensing for the services or products provided?
Does the tenant have the necessary insurance in place for the business and do they understand the landlord’s property insurance does not cover their business?
Will the tenant store stock on the rental property? What type of materials will be on the premises? Do these materials cause additional risk to the property or other occupants?

Insuring a home-based business in a rental dwelling may seem confusing. You can rest assured that the insurance experts at Grace insurance can guide you through the process and make sure you have the cover you need.

work from home

General Advice Warning: This advice is general and does not take into account your objectives, financial situation or needs. You should consider whether the advice is appropriate for you and your personal circumstances. Before you make any decision about whether to acquire a certain product, you should obtain and read the relevant product disclosure statement.

All information above has been provided by the author.

Frans du Plessis, Grace Insurance, ABN 63 133 156 742, AFSL 233750

This article originally appeared on Grace Insurance Blog and has been published here with permission.