I have a prospective tenant that wants to run a daycare/school type business out of one of my properties. I met them both today and they are very nice people and have done this before at a previous place. They’ve offered up references and are willing to pay a premium to rent the house. They also are required to keep the property in pristine condition because of the business. Does anyone have any experience with this?? I’m not sure how to tailor a lease for a business like this and what kinds of things would I be liable for??
If I were to do this I would require them to have business insurance and list you as a loss payee so you know if there is a lapse in them keeping the insurance up.
Possibly add to the lease that they are responsible for minor maintenance so that you can't be held responsible for a timely maintenance issue where someone gets hurt and wants to sue you.
Too disruptive, too noisy and too much risk and liability. Not for me. Unless it was an industrial property with parking etc.
In my market too many people who want to rent my places who don’t want to run a day care
I would never consider it
How much of a premium are they willing to pay?
What is the maximum amount of kids she will have there? Is it 5? 15?
Liability insurance would be my biggest concern. After that, the amount of additional wear and tear would be something to consider.
I would require them to carry at least 2-3 million in liability. You will also want to call your insurance company and see if they have a daycare endorsement. If not, I would increase your liability limits to the maximum allowable.
I would also want to have an attorney design a specific lease or terms to insure she is staying State compliant, etc. As to cover your back.
I think the above is just starting to scratch the surface, so you really need to ask yourself is the juice worth the squeeze?
First, you have to ensure your zoning allows for it. Second, you need to consider your neighbors and how they will feel about the excess noise or vehicle traffic. Third, you will have excess wear-and-tear on the property. Fourth, you open yourself up to liability if a kid sticks a butterknife into a socket or something. Just because this couple wasn't sued at their last place doesn't mean they won't be this time.
Have you checked their background to ensure they haven't been sued?
Are they willing to carry at least $1 million in liability insurance with you named as Additional Interest?
Have you considered how this may impact your neighborhood or spoken with your neighbors?
Will you charge a higher rate and larger deposit to cover the excess wear-and-tear and risk involved?
I did it once about eight years ago in a 4,000 sq.ft. home on a half acre that was well distanced from neighboring houses. Neighbors complained about the extra traffic but the bigger problem was the amount of wear on the house after just six months. I would never allow it again.
Thanks for all the responses. A couple replies to some of you:
I am not too concerned with wear and tear. This home has been a student rental for the past 15 years and it’s pretty worn down already. It’s a very simple house, but in good condition. My one concern is liability risk. I still don’t fully understand what I could and couldn’t be liable for. My plan is to speak to my lawyer and go from there. I plan to check references as well as background checks on both tenants. I also respect the neighbors and will ask the neighbors what they think. If both the lawyer and neighbors lean against it, I’ll most likely be deciding against it. Thank you everyone!
I had a client in CT look into this. His fiancee was looking at starting a Daycare and he wanted to use the first floor of a two family. Some of the things I suggested to him to look into before proceeding:
1. What are the local Building and Zoning codes that relate to a day care business (including fire codes)
2. Same for state regulations
3. What ADA impact on the property and building
4. Once you looked at the above, what modifications will be needed to be compliant:
- Widened Doorways
- handicap accessable toilets/bathrooms
- sprinklers? Hardwired smoke and/or fire alarms?
The other thing, what would have to be removed on the modifications to rent that space again as a residence?
Eventually my client decided not to make the change.
* Look at the difference in insurance rates, property taxes, etc. to see if their higher rent is actually more money in your pocket