I am a landlord in Tennessee and I have a tenant who wants to run an in-home daycare. The lease does not address this and I am concerned abo...

Question

I am a landlord in Tennessee and I have a tenant who wants to run an in-home daycare. The lease does not address this and I am concerned about my liability. So my question is where does the liability fall, if any, and can I simply say no this is not something I want in my rental? Also, are there any insurance requirments by either of us and can I ask for more rent or a higher deposit?

Answer

Conducting a daycare is a business operation and although your lease agreement does not address this sort of venture, my opinion is that you have the right to prohibit your tenant from starting the operation. Section 66-28-404, Tennessee Code Annotated, such being one of the provisions of the Uniform Residential Landlord and Tenant Act as adopted by Tennessee specifies, "Unless otherwise agreed, the tenant shall occupy the dwelling unit only as a dwelling unit". Therefore, it would appear that pursuant to applicable Tennessee law, you can require your tenant to conduct the daycare operation at a place other than the leased residence.

You are correct in your concern about liability. As the property owner, should a child be injured as a result of any problem with the property such as a hole on the grounds, faulty railing, etc., you, along with your tenant, could be held personally liable. Thus, if your tenant is going to conduct any sort of daycare operation with your approval, the tenant should first be required to obtain a liability insurance policy naming you as an insured with a recommended minimum policy limit of $1.0 million. As the property owner, the parents/guardians of an injured child would be looking more towards you than the daycare operator - afterall, as the property owner you would be assumed to have the "deep pockets".

Aside from the liability concern, the state, the various counties and in some instances, the different municipalities have requirements that must be met with respect to the physical facilities of a daycare operation. You very well could find yourself in a situation where you would have to incur construction expenses just to meet these requirements.

My recommendation is that you deny the tenant's request, but as the landlord, the final decision is yours to make.