Can Your Tenant Run a Business from a Dallas Fort Worth Rental?
As a rental property owner in Dallas Fort Worth, you'll inevitably get a tenant who wants to work from home. While being a remote worker is low-impact and is more and more what people are looking for, what about running a business? This all depends on three critical rules that govern the use of your rental property and what every landlord needs to know to mitigate, manage risk and enforce your lease.
The Ultimate Authority Your Lease Agreement
As a landlord your authority stems from your ownership rights and the ability to define the terms of the lease. Especially when you believe the said business will cause extra wear and tear, liability and/or nuisance. When it comes to tenant conduct, your written lease contract with your tenant is one of the most important and powerful tool you have specifically the Residential Use Only Clause. This is the language that legally defines how the tenant is permitted to use the property they are leasing. The vast majority of residential leases in Texas include a clause stating the property is to be used for "residential purposes only" and not for any commercial activity. You need to ensure your lease agreement has this in there.
Now there are genuinely two main types of businesses in which tenants engage in; the Invisible Business and the Problematic Business. The Invisible Business is one in which have the lowest risk of violating a zoning ordinance, HOA rules or the lease. Mostly because they do not require customers to visit the property. Some examples of a quiet, digital or remote based business could be a writer, software developer, consultant or Virtual Assistant. Most of the time the landlord can overlook these as the impact is minimal or non-existent. This is up to the landlord on a case by case basis.
The other type of business is a Problematic Business which comes with a greater impact on the property or neighborhood such as customer or delivery traffic. Some examples of a problematic business are a Hair Salon, Home Daycare or a Auto Repair/Detailing Body Shop. These clearly go against a standard Residential Lease Agreement which gives landlords the clear right to evict their tenant and terminate their lease.
As a landlord make sure to have your attorney review your lease. If it doesn't clearly define acceptable and unacceptable uses, revise it immediately to explicitly forbid commercial activity that impacts the property.
City Rules the Local Zoning Laws
Even if you allow a business on your property, the city or even the county may not. Every municipality has specific zoning ordinances that dictate what type of activity is allowed in a residential zone. The technical term used in zoning law which allows commercial activity in residential areas is called "No-Impact Home-Based Businesses". This is allowed in a residential area because it has no visible detectable difference from the normal activities of a private household. Make sure to check your local ordinances in Dallas Fort Worth to know what is and is not allowed on your property.
Recent state legislation House Bill 2464 has limited the ability of cities to restrict "no-impact" home businesses. However, this new law is crucial to understand: It does not override your private lease agreement or any HOA/Deed Restrictions. You can review the bill HERE.
If the lease says "no business," the lease wins, regardless of what the city allows.
Governing Documents and Deed Restrictions of the Homeowners Associations (HOA)
If your rental property is in a community governed by an HOA, you are bound by its rules, and so is your tenant. Most HOAs have restrictive covenants that strictly prohibit commercial use. If the tenant’s business violates the governing documents of the HOA’s; such as putting up a sign, uses a commercial vehicle, or non homeowner related traffic. In the event this occurs, the HOA will fine you, the landlord, not the tenant. You are responsible for enforcing the HOA rules with your tenant. If the tenant refuses to stop the non-compliant business activity, you will have no choice but to treat it as a lease violation and proceed with eviction to avoid ongoing fines from the HOA.
Managing Your Liability
Ultimately, allowing business of any kind on your residential property in Dallas Fort Worth exposes you to risks you should mitigate. Increased liability risk with customers or clients coming to your property. Make sure your agreement mandates your tenant has the appropriate Commercial General Liability Insurance policy and that you as a landlord have the correct policy to cover any incidental business use. Businesses accelerate the wear and tear on property. City or HOA fines stemming from a business running at your property are ultimately your financial responsibility.
To protect yourself, ensure your lease is update to date and unambiguous consult your attorney and if necessary update immediately. If you discover a violation, document it, issue a clear written notice of the lease breach, and be prepared to enforce the terms promptly. If you have any further questions reach out to PMI Cross Timbers and we will be happy to any your questions.
