The legalities of running a business from home

For small company owners that have been hit hard by South Africa's various lockdown regulations, the idea of moving the location of the business from an expensive commercial premise to free space on their residential property has been understandably attractive. After all, the move does away with rental expenses without increasing bond payments unless an additional loan is required for construction work.

And if there haven't been problems with people working from home, how can there be a problem with running a business from home, especially if it is a small concern?

Unfortunately, this type of thinking is misinformed, and small business owners run the risk of being shut down and burdened with expensive fines.

Law firm Van Deventer & Van Deventer notes that unlike a home business, a person working from home would not have visitors or meetings with clients at their home and so would not have a negative impact on the neighbours.

In the zone

If you're thinking of running a business from home, your first port of call should be checking your title deed for any restrictive conditions and the zoning certificate of the property. A follow up visit with the municipal or a private town planner will give you certainty on your options.

It's particularly important to note that each council has its own by-laws and rules governing zoning. This means that what is allowed in one municipality may not be allowed in another and even though certain businesses are allowed to operate in a zone, others may not. Additionally, the business owner is required to live in the dwelling and the property must be predominantly used for residential purposes.

Typically, though, small service-oriented businesses such as a bed and breakfast, a crèche, hair and beauty salons, and medical and dental practices are allowed, but there are specific limitations on each of these. Other businesses with no more than two additional employees who work on site, rarely receive customer visits, sufficient parking and will not be a nuisance to neighbours will often also be given the go-ahead.

On the other hand, businesses that are not allowed to be run in residential areas include vehicle sales, heavy mechanical repairs, panel beaters and spray painters, a shop or retail outlet, spaza shop, and any form of restaurant, bar, shebeen or tavern.

Should your title deeds or zoning not specifically allow the operation of your envisioned home business, you can apply to your council for a non-transferable temporary departure allowing you special permission; or apply to have your property rezoned. It's worth noting that the process to have a property rezoned is both lengthy and expensive; however, if you get it right, it can dramatically increase the value of your property.

Estate living

If you live in a complex, estate, or an area run by a homeowners' association (HOA) you could face additional hurdles that go beyond what is stipulated in the municipal by-laws.

The Sectional Titles Schemes Management Act, for instance, prohibits an owner or tenant from using his or her section in a manner that causes a nuisance to any other occupier in the scheme. This could see home businesses being prohibited on the basis of security, parking or noise concerns.

That said, the Community Schemes Ombud Service issued a rules amendment in mid-2021 stating that business activities can be allowed if written consent is provided by all owners of the section.

Community complaints

If your local municipality is known to be slow and generally ineffective you might be tempted to take your chances setting up your business without the required approvals. Nevertheless, experts in the real estate, legal and town planning fields warn that it is your neighbours that are likely to be a thorn in your side.

What's more, it's not just neighbours who live in close proximity that can lay a complaint against your property use, according to a recent high court decision. Instead, it said: "the essence of town planning schemes is conceived in the interest of the community to which it applies" and that those that lived in an area affected by an applicable zoning scheme had “protectable interests”.

The cost of taking a chance

Those that don't have their ducks properly in a row should be warned that the risks are considerable.

In addition to ordering you to stop the running of your business from your home, your local council is in a position to apply fines, penalties and increased rates and taxes that could be financially crippling even if you are able to continue running your business elsewhere.

What's more, neighbour and community complaints could result in extensive legal bills if the action is pursued through the courts rather than just the municipality.

Finally, be sure to consult with your insurer as using your property for both residential and business purposes could see your policy terms being violated which would lead to claims being repudiated.