My Lords, Amendment 26 stands in my name and that of my noble friend Lord Stevenson of Balmacara. It deals with the issue of home businesses which take place in rented homes.
At present, any landlord who lets residential property to tenants who then also use their homes for business finds that the landlord runs the risk that they will claim security of tenure as business tenants under Part 2 of the Landlord and Tenant Act 1954. Therefore, to protect themselves from that, very often within the tenancy agreement landlords prohibit any use of the residence for business. However, should the landlord in some way acquiesce to such a business, the tenants get security under the 1954 Act, regardless of any wording of the agreement.
Clause 35 would therefore allow that where a home business is carried on by a tenant, it would not qualify for security of tenure under the 1954 Act, and landlords can accept some working at home by tenants, who have only normal residential security of tenure. The clause also allows that where, in breach of any prohibition against business use, a tenant carries on such a “home business” and the landlord gets to know about it, effectively acquiescing in it, that would not in future give the tenant statutory rights.
We support the intention of this clause, but we are concerned about the woolliness of its wording and fear that it will deter the objectives set for it, because the clause does not say what a home business is. It says:
“A ‘home business’ is a business … which might reasonably be carried on at home”.
That caused my legal friends some amusement. The lack of clarity means that the issue will be fraught with uncertainty, which means that it is less likely that landlords or tenants will make the most of this opportunity.
Whether a tenant’s business can reasonably be carried on at home will depend on many things, which relate both to the physical building and its locality, but also to the work undertaken. We all know of a range of businesses that could happen at home: the office work that probably most of us do, catering, music teaching, tutoring, web design, computer programming, repairs, hairdressing, jewellery-making, fine art, journalism, counselling, physical fitness, accountancy, and the favourite of both the Minister and myself—dressmaking.
What can be done in the back yard of a remote cottage is a bit different from what can reasonably be carried on in a third-floor flat. Therefore, the problem is that without some guidance on what a court might take into account when deciding what a home business is, our fear is that landlords will be reluctant to venture
this way. The Minister, the noble Lord, Lord Ahmad of Wimbledon, was very helpful in the meeting he had with me on this, and in his subsequent letter. However, I am afraid that that letter betrayed a slight lack of appreciation of how easily disputes can occur over whether a business is a home business, and disputes such as that can end up in court because of the lack of any sort of clarification of what is meant by a home business.
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There is the same lack of certainty once a landlord—notwithstanding any prohibition in the terms of the letting—acquiesces in the carrying on of a business, because the tenant will not be able to claim security of tenure as a business tenant in future. The problem is that in those circumstances there will not have been any prior engagement or negotiation between the parties; there has been only acquiescence after it, so the exact business being carried out will not have been agreed beforehand. It will therefore come to a straight fight, probably in the courts, sadly, over whether the business to which the landlord has effectively consented falls within the definition of a home business. But “home business” has no such definition in the Bill, and therefore it will be for the judge to try and work it out. He may well ask why Parliament did not give a little more guidance on this. Failing that, litigation lawyers will do what they always do and litigate.
Amendment 26 lays down a non-exhaustive list of considerations that will give the parties and the courts some markers by which they can navigate their way through the definition. The Minister’s letter, which is in the Library, suggests that where a tenant has agreed that a business is a home business, and the terms of the tenancy say so, it would be hard for the tenant to go back on that. Correspondingly, he thinks it would be hard for a landlord who agreed to the carrying on of a business that the tenant thinks is not a home business then to argue that the business is a home business. It is easy to see how disagreements can occur later, partly because the home business might change. It might grow from something that started on one table in the kitchen into something rather larger. There may be a change of landlord. The business and the tenancy might be assigned from the original tenant to someone else. The tenant might get a new lawyer who might try it on, if you like, arguing that it was not really a home business—it was a business and therefore should have greater statutory rights. There are also people who simply go back on their word and will say the business is a real business, not a home business, and therefore they should have statutory rights. We are trying to give some guidance.
There is another part of the amendment that was not addressed by the Minister in his letter, which is perhaps another way to try to solve some of these problems. Where there is an initial agreement between the landlord and the tenant that a permitted business is indeed a home business, it would be binding on the parties, possibly provided they notify the court, as happens in some other circumstances. That might deal with the problem. When we had the discussion with the Minister, he argued at one point that there should
be no distinction between a home owner running a business and a tenant running a business. However, there is a third party in this: the landlord, whose interests should not so easily be dismissed. Getting the definition wrong could give tenants rights that the landlord never intended that they should have.
To assist the courts, this amendment sketches out some of the issues that might be taken into account in the definition of “reasonableness”. It lays down the sort of issues to be looked at, such whether it is reasonable for this business to receive deliveries, customers, clients, patients or students; whether they can carry out noisy activities; how close the other neighbours live; and whether the business will generate an excessive amount of vehicle traffic, maybe even congestion or parking problems. The non-exclusive list gives some indication of the sort of issues that should be taken into account.
As I said, we support absolutely the intention of Clause 35, but its success will depend on how such definitions are received in the real world, and whether there is sufficient clarity to enable both parties to know where their statutory rights, particularly the landlord’s, will fall, so that this can go ahead and achieve the objectives that we and the Government want. I beg to move.