What do I do if my tenants want to run a B&B from my property?

My new tenants have recently requested to use the large house I'm letting to them as a B&B. I would like to be able to allow them to do this but I'm hoping for some advice.

a) Seeing as I'm renting the house to them very cheaply I feel I should get more of a profit seeing as they're making money from my property. Should this be done by increasing their rent? If so, by what kind of percentage? Or should this be done by asking for a percentage of the profit? If so, what kind of percentage? Or is there any other method I have not thought about?

b) Are there other things I should do? (Insurance, tax, informing my Mortgage company). Or is everything else my tenants responisibility?

I'm very new to all this so any help you could give me would be highly beneficial!

Many Thanks!

Hi

There is a very simple answer to this ... don't do it! You are considering entering a minefield of problems, which frankly you seem under-experienced to deal with. Letting your property as a residential unit to (I assume) assured shorthold tenants is one thing, but entering into a commercial letting and allowing them operate a business is quite another. Commercial lettings are outside the Housing Act regime and a different ballgame altogether.

I would put this entire matter on the shelf for as long as it takes for you to gather information and tread the learning curve. You have already mentioned a number of important matters, such as insurance (not just buildings, but also personal and public indemnity). Your mortgage company is extremely unlikely to give permission for this type of business arrangement - and even if they do, you will need to provide lots of documentation, solicitor contracts, insurance guarantees and they will undoubtedly wish to charge you a higher mortgage premium.

Am I putting you off proceeding yet?

Also consider what would happen if the business failed? And what about the many alterations they would probably need to make to the property for health and safety, fire facilities, building regulations, etc.? Remember you could be left with a property at short notice that can only be used as a B&B due to the local authority licensing arrangements and planning registration (another requirement) and the alterations that would have to be made - and do you want that? And this is before I have started to ask whether a business like that stands much chance of success in your area. B&B owners are struggling throughout the country. Most are making a misery profit, if any at all.

All I would say is, think very long and very hard about this proposal from your tenants - and get your solicitor on board early, so you become aware of all the legal implications.

Tony Booth