What you should know about in-home businesses in your community association

These days, a lot of people are working from home, thanks to a wealth of technology that allows them to stay home with the kids and get work done. For some people, this simply means setting up a quiet home office; but for many others, it means setting up a home daycare, or baking dozens of cupcakes in their home kitchen for delivery and pick-up from clients. The problem is, not everyone in the community loves it when there’s more traffic in the neighborhood.

Some community associations have all but banned home businesses. However, things are getting trickier when it comes to the rights of condominium and homeowners’ associations to restrict or prohibit home-based businesses.

Why Would Community Associations Restrict Business Operations?

Generally speaking, these organizations do have the right to restrict home-based businesses via their covenants and restrictions documents.

There are five good reasons why they may want to do this, including the following:

1. Businesses create a lot of traffic, which may disturb the peace and quiet of the neighborhood.
2. The idea of strangers coming and going—and maybe hanging out in common areas—makes residents and owners uncomfortable.
3. Owners and board members don’t want work trucks and delivery vans parked in the street or the driveway.
4. Some businesses have to store and use hazardous materials. Most folks don’t want a chemical storage site in their neighbor’s yard.
5. They want to preserve the property value of the neighborhood, and selling the area as a “quiet residential community” is a big part of that sales proposition.

Here’s the rub: People who volunteer to serve on association boards are often lawyers. In that case, it’s very tempting to carve out an exception for in-home offices. After all, who really cares if an attorney reviews real estate transaction documents out of her or her home office? Clients and business associates may drop by occasionally, but that’s not a big deal either, right?

The perceived risk equation changes quickly when another lawyer moves in down the street and runs a criminal law practice. Residents probably don’t want suspected criminals driving into the neighborhood to meet with their attorney, even if it’s just to drop off a check.

The lesson here is that unless the association board wants to insert itself into every home-based business and vet its client list, it’s usually best to have a concise set of rules for everyone to follow.

That said, it’s probably not feasible to impose a blanket ban on business activity of any kind. These are a few thought-provoking questions to ask yourself (and the board) before implementing a ban:

• Would you ban advertisements on community bulletin boards? Think of the best high-school-aged babysitter in the neighborhood–would you be inconveniencing her and the families she works for?
• What about daycare facilities–do you think people might benefit from having one or two options?
• For a person who lost his or her job: Is it really better to evict or foreclose than to let him or her earn a living as a consultant, writer, or designer from home?
• What about neighborhood music teachers? It’s probably not necessary to limit a person who gives piano lessons out of their home.
• How about house-cleaning services? A community member who runs a cleaning service from their home may be more trustworthy than a number of other options.
• What about the pet-sitter or dog-walker who makes life in the community better for pet owners and their four-legged friends? Not to mention, dogs who are well-exercised are less likely to be disruptive to neighbors.
• What about the handyman who is always making repairs for older community members at an affordable price?
• What does it mean to ban commercial vehicles? Can a carpenter bring his work truck home every night? What about local police, who may prefer to bring their cars home after their shifts? How about someone with a small sign on the door of their car advertising a business run elsewhere?

Needless to say, it’s a tough challenge. If you set rules that are too loose, you could have a lot of vehicle and foot traffic ruining the peace and quiet of the neighborhood. However, you don’t want to be so restrictive that you put local babysitters out of business.

So what can you do?

Innovations like PayPal, Skype, and Google Hangouts make home-based businesses more and more viable–and increasingly important to American families in today’s economy. This also means that black-and-white bans on commercial activity of any kind have become less reasonable. However, it is in the interest of the community association to protect property values and the right of owners, residents, and guests to quiet enjoyment of the community.

How can you accomplish this? Consider regulating business effects rather than the business itself. For example, you may be able to limit vehicle traffic:

• Consider a biweekly or monthly volume limit on traffic. This would, for example, allow for the occasional pool party and barbecue, but would discourage anyone trying to run a business out of the house that would attract disruptive traffic on a daily basis.
• Limit deliveries to those that are common for most residents (like USPS, UPS, FedEx, and food deliveries). This allows for occasional drop-ships, but may restrict deliveries of truckloads of materials, for example.
• Limit the types of vehicles that can be on-site. A work van may be fine if it fits in the garage, but a moving truck or limousine permanently parked outside may not be acceptable.
• Revamp CC&Rs to prohibit truck traffic to addresses in the community without an on-site construction permit.
• Prohibit or limit employees other than residents. This lets your average insurance broker, real estate agent, or financial planner work out of their home office, but limits the number of extra vehicles in the driveway or on the street every day.
• If nothing else, you can always defer to zoning laws. Municipalities commonly carve out exceptions for certain kinds of home-based businesses (such as private music instruction) that generally don’t bring large numbers of people to the property. Many local governments have zoning laws that also address home offices.

Also consider safety provisions you can put in place:

• Research local restrictions and protections for home-based daycares. Some states, such as California, provide a great deal of protection from association interference. In stark contrast, some other states, like Florida and Texas, allow community associations to set their own restrictions on in-home daycare centers.
• Update your rules to address Airbnb and other similar services, where members of the public are invited to stay overnight in the community.
• Enforce nuisances and safety/security provisions, not business restrictions. Appropriately handling nuisance and safety issues with problem businesses should go a long way to preventing longer-term issues.
• Prohibit signage of any kind.

How have you handled in-home businesses in your community? Have you run into any issues or seen any benefits from allowing them? Join the discussion below and give us your best advice or horror story.