Can I Run a Business From My Apartment?

Feb 27, 2019

A shorter version of this article originally appeared in Bushwick Daily, where TLP Instructor Michelle Itkowitz is the “Tenant’s Rights Adviser”.

Hi, I’m Michelle Itkowitz, an instructor on the Tenant Learning Platform and Bushwick Daily’s Tenant’s Rights Adviser. This is the first article in a series that will bust some common myths contained in your apartment lease. As a New York City tenant, you have many rights. And no matter what your lease says, those rights cannot be taken away.

But how can you know which sections of your lease are binding and which are just…myths? This series will tackle your leasing issue one myth at a time. We’ll start with the section of your lease that says your apartment is for “living purposes only,” and what that means if you’d like to run a business in your apartment.

I. What Your Lease Says About Running a Business in Your Apartment

First, let us look at a few common lease clauses regarding the use of your apartment. Here’s one in a typical old-fashioned form lease:

“APARTMENT AND USE
…You shall use the Apartment for living purposes only.”

Here’s another clause; this one is located in a more modern lease, custom-made by a large landlord for a large new building:

“USE OF APARTMENT
The Apartment must be used only as a private residential apartment to live in and for no other reason. … Home office use is permitted, so long as such use does not violate applicable laws, and provided that no employees or clients use the Apartment with respect to such home office use. No auctions, sales, public gatherings, group tours or exhibitions are permitted. Any business meetings conducted by Tenant at the Building shall take place in the lounge in the Building and shall be subject to all provisions of this Lease relating to guests, visitors, meetings and conferences.”

But are you really prohibited from running your business in your apartment? And if you do run your business from your apartment, can you never have an employee come in to help you, or see a client, or customer? Bushwick is full of creators and office space is expensive. What should you do if you’re selling small batches of kombucha or hot sauce made in your living room? And what if you are using your living room for tarot card readings for select clients?

II. The NYC Zoning Resolution governs what kind of business you can conduct in your home.

A. Unpacking the Zoning Resolution

The law on this topic is contained in the New York City Zoning Resolution (“ZR”) , which is complicated, so we are going to read a little bit of the statute and then unpack it; bear with me.

ZR Art. II (Residence District Regulations) Ch. 2 (Use Regulations) § 22-11 (Use Group 1) and § 22-12 (Use Group 2) cover all residences. These Use Groups allow what is elsewhere defined in the ZR as “accessory uses”. At ZR § 12-10 “accessory use” is defined as, “…a use which is clearly incidental to, and customarily found in connection with, such principal use…” and accessory uses include “home occupations”.

In ZR § 12-10 home occupation is partially defined as follows:

“(a) A “home occupation” is an accessory use which:

(1) is clearly incidental to or secondary to the residential use of a dwelling unit or rooming unit;

(2) is carried on within a dwelling unit, rooming unit, …by one or more occupants of such dwelling unit or rooming unit, except that, in connection with the practice of a profession, one person not residing in such dwelling unit or rooming unit may be employed; and

(3) occupies not more than 25 percent of the total floor area of such dwelling unit or rooming unit and in no event more than 500 square feet of floor area.

(b) In connection with the operation of a home occupation, it shall not be permitted:

(1) to sell articles produced elsewhere than on the premises;

(2) to have exterior displays, or a display of goods visible from the outside;

(3) to store materials or products outside of a principal or accessory building or other structure;

(4) to display, in an R1 or R2 District, a nameplate or other sign except as permitted in connection with the practice of a profession;

(5) to make external structural alterations which are not customary for residences; or

(6) to produce offensive noise, vibration, smoke, dust or other particulate matter, odorous matter, heat, humidity, glare, or other objectionable effects.”

Therefore, the trick is figuring out what type of businesses and activities fit into the definition of permissible home occupation and which do not.

Your business use of your apartment must remain secondary to the residential use of the apartment. In other words, your apartment must be mainly for living in. Your business cannot occupy more than twenty-five percent of the apartment, and no more than 500 square feet. So, if you are running a company that makes biodegradable toothbrushes from your apartment, make sure you contain the business to only one-quarter of the apartment (which will be less than 500 sf, unless you live in a 2000+ sf apartment).

You cannot sell things that are not produced in the apartment. Nothing about your business can be visible from the outside of the apartment; you cannot put a sign up outside. Your business cannot create any disturbing noise, vibrations, or bad odors.

If the business is permissible, you can have one employee show up to the business you run in your apartment every day. So, don’t worry, you can have one paid employee for your business that places vending machines in airports, stocked with the work of that city’s local artists (this business sounds awesome, someone please start it in Bushwick).

I always found this section of the ZR pretty random, but certain home occupations are specifically permitted, and certain home occupations are specifically prohibited. In ZR § 12-10:

“(c) Home occupations include, but are not limited to:

• fine arts studios
• professional offices
• teaching of not more than four pupils simultaneously, or, in the case of musical instruction, of not more than a single pupil at a time

(d) However, home occupations shall not include:

• advertising or public relations agencies
• barber shops
• beauty parlors
• commercial stables or kennels
• depilatory, electrolysis or similar offices
• interior decorators’ offices or workshops
• ophthalmic dispensing
• pharmacy
• real estate or insurance offices
• stockbrokers’ offices
• veterinary medicine”

So, you can give three students knitting lessons, but only one student ukulele lessons, and not too loud! What gets tough is figuring out what is a “fine arts studio” or a “professional office,” for purposes of the law.

B. Cases interpreting the Zoning Resolution exemption for home occupations are highly fact specific.

Cases interpreting the Zoning Resolution exemption for home occupations are highly fact specific.

In Mason v. Department of Buildings of City of New York, 307 AD2d 94 (1st Dept 2003), the court upheld a finding by the New York City Department of Buildings that a tenant renting an apartment for use as a commercial recording studio was an invalid home occupation use. The court in Mason noted that the legislative thrust of the exemption conveys a goal of protecting artistic and professional uses, but not general commercial uses. Mason at 102.

In Dept. of Buildings v. Owners and Occupants of 86 Prospect Park Southwest, OATH Index N. 1900/06 (Jan. 19, 2007), aff’d, Comm’r Dec. (Mar. 14, 2007), a Board of Standards and Appeals case, the occupant of the premises ran a business:

“in the front portion of her home performing work as an organization development consultant. The building in question was a three-story building and the home office was situated in a room off the front entry of the house. The office contained three desks, one was used by an employee. [The occupant testified that she used] the office to research, design and develop materials for her company but did not see clients there. [At issue was whether her use of the premises violated the Zoning Resolution or is a] permissible home occupation accessory use. [The City argued that the tenant was] not operating a permissible home occupation because her office occupies more space than is permitted under the Zoning Resolution, and because “organizational development consultant” is not a permissible profession under the Zoning Resolution.”

Ultimately, after a seventeen-page decision, the Board of Standards and Appeals in 86 Prospect Park Southwest found that the use was permissible.

C. Does the Zoning Resolution supersede the lease between the parties?

So far, we have discussed how most residential leases prohibit you from running a business in your apartment. We have also discussed the fact that there are many permissible home occupations, according to the ZR. Thus, the question is – does the ZR allowance for home occupation in an apartment supersede the contract between the parties, i.e. the typical lease provision that says you must use your apartment for “residential purposes only”?

The ZR does not overtly state that it overcomes a lease between the parties or that any prohibition of a “home occupation” would be void against public policy. In fact, as per Park West Village v. Lewis, 62 N.Y.2d 431 (1984), New York State’s highest court has stated that a restrictive covenant limiting the tenant’s use and occupancy of an apartment exclusively to residential purpose is enforceable if violation of such clause results in a violation of a substantial obligation of the tenancy. In Park West Village the tenant was Rent Stabilized and conducted her entire psychotherapy practice from the apartment, seeing 15 to 22 patients at the apartment per week. The court in Park West Village upheld the termination of the tenancy. But we need to dig a little deeper here.

Even if the tenancy in Park West Village was not Rent Stabilized (and, therefore, subject to a great degree of scrutiny) and even if the lease did not contain a prohibition limiting tenant’s use to residential purposes only, the tenant in Park West would still have been in violation of the ZR, because her use of the apartment to conduct a busy, full-time psychotherapy practice was certainly not ancillary. If a tenant’s home occupation remains within the bounds of the ZR, then, among other things, the home occupation is ancillary (secondary), takes up less than twenty-five percent of the apartment, and doesn’t cause a nuisance to any other occupant of the building. If this is the case, then the home occupation does not transform the tenant’s occupancy into anything other than a residential occupancy.

In other words, having a home occupation in your apartment is occupying your apartment for living purposes only. See Besser v. Beckett, 253 A.D.2d 648 (1st Dept 1998) (“We reject defendant’s argument that the clause in plaintiff’s lease limiting his use of the apartment to ‘living purposes only’ necessarily mandates injunctive relief prohibiting any commercial use of the apartment to give voice lessons…musical instruction of not more than one pupil at a time appears to be a permitted ‘home occupation’ under New York City Zoning Resolution.”)

III. For home-based childcare, the legislature has preempted lease restrictions.

I include mention of the family day care cases because this is an area where a statute specifically preempts lease restrictions and allows this specific type of business to be run in an apartment if the tenant has obtained to relevant license therefor. See Marick Real Estate, LLC v. Ramirez, 11 Misc.3d 42 (AT 2nd , 2005) (Tenants’ use of apartment as family day care did not violate lease term prohibiting non-residential use.) and Carroll Street Properties v. Puente, 4 Misc.3d 896 (AT 2nd 2004) (Tenant’s use of second floor apartment in non-fireproof building as family day care home was not impermissible under Social Services provision governing child day care; tenant was registered family day care provider, and tenant had not violated any fire regulations or caused any violation to be placed against building.)

It is way beyond the scope of this already long article to fully address “family day care” programs as established at Social Services Law § 390. If you are planning, however, to care for children that are not your own in your apartment, make sure you look online and find resources explaining how to get your license to run a family day care in your apartment.

IV. Case law has recognized that to not allow a tenant to create art in her apartment is often against public policy.

Case law has also recognized that to not allow a tenant to create art in her apartment is often against public policy. A case that demonstrates this concept, and which also contains some very beautiful language, is Haberman v. Gotbaum, 182 Misc.2d 267 (NYC Civ. Ct. NY Cty. 1999), where a landlord tried and failed to evict a tenant for creating paintings in his apartment for commissions. Judge Ling-Cohen wrote:

“[P]ublic policy dictates that artists who create art in their homes are not engaged in a business use of the premises to warrant the extreme sanction of eviction…Many artists throughout history have used their homes as art studios including Chagall, Picasso, Giacometti, Duchamp and Georgia O’Keefe. From Beethoven composing symphonies in his rented room to Andy Warhol creating legendary pop art in his New York home/factory/studio, it is a tradition throughout the world. In fact, Van Gogh even made his own bedroom the subject of one of his most famous paintings. In the biography of New York painter Joan Mitchell, it is claimed that she rented a small house, between Bleecker and Seventh Avenue, where she lived and painted; later on, she moved to an apartment on Ninth Street in the Village, where she used the living room as a studio. If every New York artist who did artwork out of his or her home were able to be evicted, then the next Robert Rauschenberg or Andy Warhol (all New York artists who worked out of their home) may never have the opportunity to evolve and become a success.”

You can almost imagine the Judge’s words in Haberman v. Gotbaum being applied to modern-day start-up companies that people launch from their apartments. If Facebook was launched in a dorm room and Amazon in a garage, what next game-changing business might you invent from your apartment if your landlord leaves you alone to evolve?

V. Landlords suing tenants for running businesses in their apartments often also sue for nuisance.

When a landlord sues a tenant for running a business in her apartment, the landlord often sues the tenant, not only for a violation of a substantial obligation of her tenancy, but also for nuisance.

In 121 Irving MGM LLC v. Perez, 56 Misc.3d 694 (NYC Civ. Ct. Kings Cty. 2017) affirmed 63 Misc3d 157(A) (AT 2nd 2019), the appellate court sustained a tenant’s right to prepare food in her apartment for sale elsewhere. In 121 Irving v. Perez, there was evidence that a residential tenant used her rented apartment’s kitchen to prepare 12 to 15 meals a day, six days a week, for sale outside the apartment. “There was no evidence of [neighboring] tenant complaints. There is no showing of such things as increased traffic to the premises or a rodent or cockroach infestation, fires, floods or any other negative consequence that has resulted from respondent’s cooking which has lasted for the past 16 years.” There were no municipal violations issued against the premises. The trial court found that tenant was not operating a large business enterprise and instead she was an example of an enterprising immigrant mother helping to support her family by preparing home-cooked meals for workers at construction sites.

It is beyond the scope of this article to do a complete treatment of nuisance cases, but suffice it to say, that the business you run from your apartment should not bother anyone.

VI. Landlord Waiver to Running a Business in an Apartment

Moreover, there is another possible pathway by which a business conducted in your apartment can be adjudged legal. That is, if you have been running the business for a very long time and the landlord, who would otherwise have a legal objection to the use, waits too long and thereby waives her right to object.

In a recent Housing Court case, the court found that landlord waived its right to object to a karate school, which taught more than four students at one time, where the tenant proved that he operated the karate school for more than 40 years prior to the commencement of the proceeding. Sam and Joseph Sasson LLC v Guy, 2018 WL 6718878 (N.Y.City Civ.Ct.), 2018 N.Y. Slip Op. 33231(U). The floor plans, dated 1992, referred to a karate school. The owner testified that he was aware of the karate school perhaps as far back as the late 1990s. The court held that a “condition of such a [lengthy] duration gives rise to a presumption” that landlord and/or the prior owner acquiesced in the use.

A waiver defense, however, does not apply when the default is serious enough as to implicate public policy. Bel Air Leasing L.P. v. Kuperblum, 15 Misc 3d 986, 991 (Civ. Ct., Kings Co. 2007) (accepting rent after knowledge of illegal drug trade in apartment does not create waiver).

VII. Conclusion

More people than ever before are working from home. Just make sure that the business that you run from your apartment does not imperil your tenancy.