renters want to teach preschool and toddler classes out of our rental property

10 Replies

Hello everyone, I have one rental property SFH and the tenant wants to run a preschool and toddler classes out of our house. They have lived in our property for 3 months and we have had no problems with them they have always been on time or early with rent. The lease states that they can not run any type of business out of the house. She wants to have 5 children. What is my liability when it comes to this? If I do let them should I increase their rent? Would you allow your tenants to do this? Should I just tell them no? any help or suggestion are greatly appreciated.

Bradt

Originally posted by @Brady Thompson:

Hello everyone, I have one rental property SFH and the tenant wants to run a preschool and toddler classes out of our house. They have lived in our property for 3 months and we have had no problems with them they have always been on time or early with rent. The lease states that they can not run any type of business out of the house. She wants to have 5 children. What is my liability when it comes to this? If I do let them should I increase their rent? Would you allow your tenants to do this? Should I just tell them no? any help or suggestion are greatly appreciated.

Brady

I too had a tenant ask about running a daycare out of my rental property. I spoke to my Insurance agent who said " No way" due the additional liability unless they are willing to take out their own business liability policy and name me as an additional insured. I decided against this due to the tenants not being able to afford that additional insurance. I would check with your Insurance Agent and get their advice. 

I'm not sure of the laws and regulations in Indiana, but in NYS they are extensive when it comes to running a preschool, or daycare - unless they are doing so and not registering as a legal entity.  It would be a massive amount of liability on you.  Usually, there has to be an inspection of the property to be sure things are up to code when it comes to educating children, so any updates that would need to be made would fall on you, I would assume?  To me, it seems like a lot to take on.  Personally, I would steer clear.  

You need to look into your state and local laws about this. In CA, if a tenant wants to run a daycare in a SFH, the landlord must allow it, but I think the landlord is allowed to require the tenant to get adequate insurance (this does not apply to a unit in a multifamily, according to what I've read). We only have multifamily rentals, so we would not allow it, due to the increased wear and tear, and the liability.

At a minimum, if you decide to allow it, make sure you require them to get insurance.

I think this is a clear no. The clause about not running a business from the premises is there for a reason, and liability and zoning are just the start. What kind of damage are these children going to cause to your property with all their coming and going? You did not sign on for this. They must have at least been contemplating this when they started to rent from you. Did you make the relevant lease clauses plain to them? You should now, and enforce them.

I have seen this before. The state only allows so many children at a time. The parents pay a cheaper rate because your tenant is not paying the typical overhead to run a larger daycare.

The tenant's business has to have insurance and proper permits. If your tenant has to go get a building to rent for business then the numbers do not work. Tenants will say they have insurance and after that will drop it.

It's just too much hassle. Tell them your insurance does not allow for such an activity that way you are not the evil landlord. If the tenant pushes for it say they will need to find another place to live as it will be a lease violation.

No legal advice given.    

If you can legally say no, then say no.  In addition to the above, if you give permission for them to run a preschool, where is your base line for "normal wear and tear"?

I'm making a scary face now.

No. Don't do it.

Don't bend the rules of your own lease. You are always better off to stick to what you have in writing. "Bending the rules" can negatively impact tenant behavior and create bad habits.

Then before you know it you are in a big mess and have only yourself to blame.

I allowed my tenants to run a daycare in Maryland.  Before she could run it she had to pass all state certifications and get her own insurance which she did.  If you are thinking about it you should look up the requirements in your state for running a family based daycare and how it will affect you as a landlord.  Luckily,  I didn't have any problems.  She no longer use the home as a daycare.  

PS:  I also have great tenants been renting going on 7 years and only paid late once and sent late fees and apology letter.

Thank you for all of the input I greatly appreciate it.  I decided to tell them no. I don't want to deal with extra liability.

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