If you’re among the many small business owners who operate out of your residence, and you’re looking to relocate, you don’t want to move to your new dream home only to find out your enterprise isn’t allowed to operate there.
More than half of small businesses registered in the United States are home-based, according to the U.S. Small Business Administration. Entrepreneurs who maintain home offices should research local licensing, homeowner’s association covenants and zoning rules before committing to buy a house.
Often a home business is not permitted if customers are required to come to the home or it involves specialized equipment.
“In most situations, determining the permitted uses of a property is entirely the buyer’s responsibility. Once you buy the house, it’s likely too late to do anything about a use restriction,” said Tony Boone, deputy general counsel at The Long & Foster Companies.
If the local zoning rules prohibit your type of business, there may be a process for applying for a variance. However, that is often an expensive and difficult endeavor with no guarantee of success.
Business-owning home shoppers should call the department of planning and zoning in their prospective locality and ask if their at-home business is allowed at the new address, said Callie Dalton, a top producing Long & Foster agent in Roanoke, Virginia. Buyers also need to review any homeowners’ association documents whose covenants, rules and regulations likely to govern the use of the properties in the neighborhood.
“We do suggest that they check with the HOA and local zoning boards to be sure that the property can accommodate a home business prior to writing an offer,” Dalton said. “That way, we aren’t tying up someone’s home, only to find out later it is not suitable for the buyer’s needs.”
Most HOAs prohibit any business that increases foot traffic in the neighborhood, Boone said. Mail-order businesses, on the other hand, might be allowed because they don’t require customers to visit the property. However, there is no standard rule and what is permitted in one neighborhood may not be in another.
Boone recommends speaking with a real estate attorney if the use of a home for business purposes is an important factor for the buyer, “Zoning, covenants of title and HOA rules can be complex and the distinction between permitted and prohibited businesses can be very subtle.”
Mike Mavromates, a Long & Foster agent and managing broker in Avalon, New Jersey, said most of his clients who plan to work from home in his state, for example, don’t need special zoning permission because they only maintain small, single-person offices, with the bulk of business conducted elsewhere. These professionals – such a loan officers or real estate agents – might perform office work at home, but don’t usually bring clients to their personal residences.
But a number of home-based business owners do need to obtain proper approvals with the municipality’s zoning authority, he said.
“They have to provide details, to include how many clients will visit, parking information, how many customers may visit at one time, etc.,” he said. “Depending on their industry or store, there are signage restrictions and strict requirements for lighting and restrooms, to name a few. They must be aware of and have appropriate approvals.”
The SBA offers general guidelines for researching your location and making sure you are correctly registered with state and local authorities. The administration has offices throughout the country where business owners can get advice about complying with state and local regulations.
Next week, we’ll look at what insurance is recommended for at-home businesses.