My Lords, amendments to Clause 35 will help to clarify the definition of home businesses to be captured by amendments to the Landlord and Tenant Act 1954, subject to the affirmative procedure and, additionally for Wales, a resolution of the National Assembly for Wales.
As my noble friend Lady Neville-Rolfe mentioned, there are around 4.9 million small and medium-sized businesses in the UK. Of those, 2.9 million are home businesses. Home businesses are of growing importance to the economy with an increase of 500,000 home businesses since 2010. There can be obstacles to those wanting to run a business from home, but this Government want the sector to continue to flourish. That is why we are committed to do what we can to remove them.
For those who rent their home, things can be particularly complicated. Many tenants state that landlords can be wary of letting them run a home business. Indeed, residential tenancy agreements will often include a prohibition on business use. One of the reasons landlords do this is because the current legislation encourages them to do so. Section 23 of the Landlord and Tenant Act 1954 provides that where there is a business use of a property a business tenancy exists. Since business tenancies enjoy greater security of tenure, residential landlords are keen to avoid them as they fear it will be more difficult to get their property back at the end of a lease.
It is this area that Clause 35 seeks to address by amending Part 2 of the 1954 Act to exclude home businesses from its provisions. First, we are inserting a new subsection into the 1954 Act. This deals with the instance where a landlord initially includes a prohibition on business use but subsequently agrees to home business use, defined as business of a kind which might reasonably be carried on at home. Secondly, Clause 35 adds a new Section 43ZA to provide that where a dwelling is let as a home, and the tenancy allows a home business use from the outset, or does so subject to the consent of the landlord, a business tenancy is not created.
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Amendment 34 establishes a basic definition of a home business in new Section 43ZA(4) to ensure that only businesses that could reasonably be carried out in a home benefit from the exemption from Part 2 of the 1954 Act. The regulation-making power at subsection 43A(6) allows cases of what is and is not a home
business to be prescribed. I believe, however, that the main provision is sufficiently clear that the use of this power may not be needed.
I should also make clear that these provisions will not interfere with existing tenancies. Subsection 35(5) provides that the provisions apply only to tenancies entered into after the coming into force of the provisions. Subject to the National Assembly for Wales’s agreement to a legislative consent Motion, these provisions will apply to both England and Wales. These provisions will provide certainty for both residential landlords and tenants. By doing so, we will make landlords more amenable to home business use.
I believe that removing the existing obstacle that stands in the way of tenants in the rented sector being able to enjoy the benefits associated with running a home business is difficult to argue against. I see no reason why people who rent should be prevented from benefits, such as lower overheads, or from being able to balance their work and family responsibilities more flexibly.
I hope noble Lords can see that these amendments are a sensible updating of the law to reflect how we increasingly use our homes. The related government amendments to Clauses 152, 153 and 157 are purely technical and ensure that amendments to Clause 35 and after also apply to Wales. On that basis, I hope noble Lords will support these amendments. I look forward to hearing the noble Baroness speak to the amendments tabled in her name.