The Small Business, Enterprise and Employment Bill received Royal Assent on 26 March 2015 and is now the Small Business, Enterprise and Employment Act 2015 (SBEEA 2015). For property practitioners and investors there are some notable amendments included relating to the operation of the Landlord and Tenant Act 1954.
SBEEA amends the LTA 1954 to deal with leases that allow the tenants to use the premises for "home business" purposes. The aim of these changes appears to be to encourage business, by allowing landlords to permit tenants to use their homes as business premises without running the risk of the tenants acquiring security of tenure under Part II of the LTA 1954.
Section 23 of the LTA 1954 sets out which tenancies are subject to Part II of that Act, and so have security of tenure under it. Pursuant to Section 23(4) a tenancy does not attract security of tenure where business use is in breach of a term of the tenancy, unless the landlord has consented to, or acquiesced in, the breach.
Section 35 of the SBEEA 2015 amends section 23 of the LTA 1954 to provide that, even if the landlord has agreed to the breach (or acquiesced in it), the tenant still does not obtain security of tenure under Part II of the LTA 1954 where the business use is solely for the purposes of a "home business". This term is defined in a new section 43ZA that will be added to the LTA 1954 by section 35 of the SBEEA 2015.
Section 43ZA of the LTA 1954 defines a "home business" as "a business of a kind which might reasonably be carried on at home”. This definition is perhaps likely to lead to argument, although section 43ZA envisages that there will be regulations that clarify the meaning of the term.
Section 43ZA applies where there is a lease of a house as a separate dwelling to an individual (or individuals). The term "house" is not defined although section 43ZA (10) provides that it may also be part of a house. This suggests that a residential lease of a flat in a block might not be caught by the new provision. The lease must provide that the let premises are to be occupied as a home, but permit the tenant to carry on a home business (or allow the landlord to consent to such a use).
The tenancy must not permit any other sort of business, or it will fall outside section 43ZA of the LTA 1954.
The new section 43ZA(8) of the LTA 1954 provides that a house (or part of a house) that is let for mixed residential and business use is "capable" of being let as a dwelling. The aim of this seems to be that premises let on terms that expressly envisage a mixed residential and business use (such as a live/work unit) can still be caught by section 43ZA. It will be a question of fact if the premises are actually let as a dwelling.
Comment: It will certainly be interesting to see how this legislation evolves in practice ….an obvious point of attack will be the definition of home business and where in doubt Landlords should continue to exclude the provisions of the Act in respect of tenancies and seek professional advice before completing tenancies that may fall within the 1954 Act.