Attorneys at Law

Disclaimer: The information contained in this article is provided for general information purposes only and is not intended to be a legal opinion, legal advice or a complete discussion of the issues related to corporate formation. Every individual's factual situation is different and you should seek independent legal advice from an attorney familiar with the laws of your state or locality regarding specific information.

This article, written by Mr. Weiss, originally appeared in the Fall 1993 issue of the Planning Commissioner's Journal.

Good philosophy. Bad law.

In today's society the relations between neighbors are more and more commonly governed by land use agreements, declarations of covenants, zoning regulations and the like. Telling your neighbor what s/he can or can not do in his or her home is beginning to become as American as pink flamingos in the front yard. And neighbors these days are using the club of restrictive covenants and zoning regulations against home-based businesses.

This trend began in earnest in the 1970's. With the proliferation of condominiums also came a proliferation of rules governing everything from what color your window blinds could be to what "non-residential" activities could be performed in your home. As planned communities and homeowners associations became more common, so did regulating the land use of their residents.

Until recently, this was not a very serious problem. Other than doctors and child care providers, very few of us worked from our homes for profit. With the technological tidal wave of the past few years enabling the development of new computer-based businesses (such as small-scale desktop publishing), increased use of telecommuting, all coupled with the recession, many are finding that working out of their homes is not only necessary or desirable, it is good business. But with this increased use also come increased problems.

Since most restrictive covenants and zoning regulations were written before home-based business on such a large scale was practical, they do not take into account the changed character of the type of work that is performed in one's home. Even those written today do not always take these changed circumstances into account. I will give a personal example. Several years ago, my wife and I began to look for a new home. We found one that we liked, a new home in a brand new development. The Declaration of Covenants, Conditions and Restrictions for the development read as follows:

The Lots shall be used for residential purposes exclusively (commercial or business uses are prohibited except as provided herein) . . . except that a professional office may be maintained in a dwelling, provided that:

(i) such maintenance and use is limited to the person actually residing in the dwelling;

(ii) no employees or staff other than a person actually residing in the dwelling are utilized;

(iii) such maintenance and use is in strict conformity with the provisions of any applicable zoning law, ordinance or regulation, and

(iv) the person utilizing such office maintain a principal place of business other than the dwelling.

It is apparent that in this community no home office which is the primary business of a resident is to be permitted, no non-professional offices are allowed, and even in cases where they are allowed, no non-family members can be employed.

Unfortunately, this type of language is far from rare—in fact, I found identical wording in two other Declarations. The zoning statutes in many jurisdictions can be even harsher; outright prohibition of home-based business has been the norm.

The primary purpose behind these use restrictions is to preserve the residential character of the community, a laudable goal and one few would quarrel with. The question is: how can this legitimate protection of a neighborhood co-exist with the legitimate needs and wants of its residents to work out of their homes?

The answer lies in examining the real purpose behind these restrictive covenants and zoning laws, rather than their precise language. They can be reduced to three:

• Keeping the residential character of the community;
  
• Minimizing traffic along residential streets (with a real concern about child safety) and avoiding the noise normally associated with "traditional" businesses; and
  
• Keeping strangers out of a community/safety issues.

Montgomery County, Maryland, has done a fairly good job in balancing these interests in its zoning laws. The County sets up four categories of "home occupations," each of which varies on its impact on the surrounding community: no impact, registered, major, and home health practitioner. Each category entails a greater degree of government involvement in regulating the conduct of the business than the one before it. The following is a summary of each of these categories:

A "no impact" home occupation is defined as one which has no more than five vehicle visits per week, has no non-resident employees and is incidental to the residential use of the building. Such uses are not regulated and are freely permitted in all residential zones.

A "registered" home occupation is one which (1) is not a "no impact," (2) the owner lives in the home more than 60% of the year, (3) no more than 1/3 of the home area is devoted to the business, (4) the business generates no noise, vibration, glare, fumes odors or electrical interference detectable beyond the property line of a detached unit or the party wall of an attached unit, (5) no hazardous materials are used, stored or disposed of, (6) no truck deliveries are permitted (except for parcel services such as UPS or Federal Express), (7) the business is conducted by a resident of the home with no more than one non-resident employee, and (8) there are a maximum of twenty visits per week and five per day by clients or customers. A registered home occupation must also keep a log of all visits made to the home for the business. There is no special exception requirement, merely an application and registration.

A "major" home occupation must comply with requirements 1, 3, 4 and 5 of the minor home occupation, may not have more than two non-resident employees, visits by clients must be by appointment only, there must be sufficient on site off-street parking, and truck deliveries can be restricted. Approval must be by the special exception process after a hearing and notice to abutting property owners.

A "Home Health Practitioner's Office" is required to comply with additional requirements that are beyond the scope of this article.

These requirements—though not perfect—represent a change in the treatment of home-based business from outright prohibition to regulation based on impact on the community. The greatest problem in their application is that more onerous local restrictive covenants take priority over the zoning regulations; a home-based business may be allowed under the zoning code but can still be prohibited by the neighborhood covenants.

The solution is threefold: first, encourage new developments to adopt restrictive covenants which do not prohibit home-based business (the means for changing existing covenants is normally so difficult as to be impossible). Second, encourage the enactment of zoning regulations which allow home-based businesses, coupling the degree of regulation with the level of impact on the community. Third, seek statewide laws which would prohibit the enforcement of onerous restrictive covenants which prevent home-based business from operating.

We need to encourage, not discourage, employment opportunities, wherever they may arise. In the coming decade, more and more will want or have to work out of their homes. We must be ready for them.

We can help you establish a firm, legal base for your new business, as well as making sure that you don't run afoul of zoning and restrictive covenants. From the Business Plan through Incorporation, Bylaws, Shareholder's Agreements, Contracts, and other planning measures, we work with you to see that all you have to worry about is running things. Call us at (301) 924-4400 or e-mail us to set up an appointment.