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Disclaimer: Educational purposes only. Not legal advice. Consult a qualified NZ legal practitioner for your specific circumstances.

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tenancy

Can you run a business from a residential rental?

Key Takeaway

Running a business from a residential rental in New Zealand generally requires landlord permission and compliance with the tenancy agreement. Tenants must ensure the business does not cause nuisance, damage the property, or violate local council rules or other laws. The primary purpose of the rental remains residential.

Running a Business from a Residential Rental Property in New Zealand

In New Zealand, many people operate businesses from their homes. For tenants in a residential rental property, this practice is subject to specific rules, rights, and obligations under the Residential Tenancies Act 1986 (RTA) and the terms of their tenancy agreement (a legally binding contract between a landlord and a tenant that sets out the terms and conditions of the tenancy).

Key Considerations Regarding Tenancy Agreements

Most tenancy agreements specify that the premises are to be used for residential purposes only. If an agreement contains such a clause, a tenant who wishes to operate a business from the property would need to seek the landlord's written consent to vary the terms of the agreement. While the RTA does not explicitly prohibit home-based businesses, it governs the overall relationship and the permissible use of the property. A tenancy agreement cannot include terms that are inconsistent with the RTA or remove rights and obligations provided by the Act [Source: Residential Tenancies Act 1986, s 13A].

Tenant's Obligations Under the Residential Tenancies Act 1986

The RTA places several key obligations on tenants that can impact the feasibility of running a business from a rental property:

  • Use for Unlawful Purpose: A tenant must not use the premises for an unlawful purpose (an activity that is illegal or prohibited by law) [Source: Residential Tenancies Act 1986, s 40(1)(c)]. This extends beyond criminal activity to include breaches of other relevant legislation, such as local council bylaws related to zoning or health and safety regulations.
  • Nuisance or Interference: A tenant must not cause or permit any nuisance (an unreasonable interference with the use and enjoyment of land by others) or interference with the reasonable peace, comfort, or privacy of any neighbour [Source: Residential Tenancies Act 1986, s 40(2)(a)]. A business that generates excessive noise, traffic, or odours, or involves numerous clients visiting the property, could be deemed a nuisance.
  • Damage to Premises: A tenant must not intentionally or carelessly damage the premises, and must notify the landlord of any damage as soon as possible [Source: Residential Tenancies Act 1986, s 40(1)(d), s 40(1)(da)]. Business activities might increase wear and tear on the property beyond what is considered normal residential use, or could lead to specific types of damage, for which the tenant would be liable.
  • Cleanliness: A tenant must keep the premises reasonably clean and tidy and must keep them clear and free from rubbish and objectionable matter [Source: Residential Tenancies Act 1986, s 40(1)(a)]. Business operations generating significant waste or requiring large amounts of storage could potentially breach this obligation.

Other Legal and Practical Considerations

Beyond the RTA, running a business from a residential rental property may require compliance with other legal requirements. If these are breached, the tenant could be found to be using the premises for an unlawful purpose under the RTA:

  • Local Council Zoning: Local councils have district plans that designate zones for specific uses (e.g., residential, commercial, industrial). Operating a business in a residential zone may be prohibited, restricted, or require resource consent (a formal approval from a local council for an activity that affects the environment or community). Tenants should contact their local council to understand the zoning rules for their specific property and the types of businesses permitted.
  • Health and Safety Regulations: Certain types of businesses, such as those involving food preparation, childcare, or manufacturing, are subject to specific health and safety standards and regulations. Compliance with these is mandatory.
  • Insurance: Running a business from a rental property may impact the landlord's property insurance policy. Landlords often require tenants to obtain their own business liability insurance. Both parties should review their insurance policies and consult with their insurers.
  • Business Registration and Licences: Depending on the nature of the business, it may require specific registrations, licences, or permits from central or local government agencies.

Landlord's Perspective

If a landlord agrees to a tenant running a business from the premises, they may wish to formalise this by amending the tenancy agreement to include specific clauses regarding:

  • The type of business permitted.
  • Hours of operation.
  • Maintenance of the premises and responsibility for increased wear and tear.
  • Requirements for specific insurance policies.
  • Any necessary modifications to the property (which would generally require the landlord's prior written consent) [Source: Residential Tenancies Act 1986, s 42].

Landlords also need to consider the implications for their own insurance and any potential breaches of their own obligations or council rules by permitting commercial activity.

When to Seek Independent Legal Advice

Tenants and landlords considering the operation of a business from a residential rental property are encouraged to seek independent legal advice. This information is general and does not cover all specific circumstances. For guidance on individual situations, individuals may contact Tenancy Services (part of the Ministry of Business, Innovation & Employment) for general information, or consult with a lawyer or a Community Law Centre for free legal advice.

Key Resources