Regulating Home-Based Businesses: An Overview

This article provides an overview of the legal background and substantive and procedural implementation of government regulations of home-based businesses, professions, and occupations. The article discusses lists of approved and banned home businesses, modern regulations using performance standards, and procedures, including special or conditional use permits and zoning board hearings.

Local governments regulate home-based businesses via their local zoning ordinances. There are different ways to approach the regulation of home-based businesses. Some localities choose to regulate home-based businesses by specifically listing what is allowed and what is prohibited in a residential neighborhood. While others choose to regulate using performance standards based on the business’s impact on the surrounding residential area. Often local counsel is tasked with drafting these regulations and describing the commercial use of the property and its compatibility with the property’s principal residential use. This article discusses the concepts of home-based business regulation to local counsel, including:

• Commonly used ordinance terms.
• Traditionally allowed and banned occupations.
• Performance-based standards.
• Procedures to implement regulations including decisionmaking mechanisms.
• Variances, special use permits, and zoning board hearings.

Commonly Used Ordinance Terms

Home-based businesses are usually allowed to some extent by local regulations. The zoning ordinance may list this type of business in different ways, including:

• Customary home occupation.
• Businesses incidental to residential uses.
• Uses subordinate or secondary to housing as the primary use.
• Uses or structures accessory to a residence.
• No-impact home-based businesses.

Home-Based Business Regulations

Regulating by Lists of Traditionally Good and Bad Uses

Traditionally Allowed Occupations

Local ordinances have historically allowed specific occupations because they were traditionally or custumarily located in homes. Examples include:

• Dressmakers and tailors.
• Artists and art galleries with limited retail sales (see Ohrenstein v. Zoning Bd. of Appeals of Town of Canaan, 833 N.Y.S.6 763 (3d Dep’t 2007)).
• Composers and writers.
• Phone-based businesses, such as an answering service or small call center.
• Small arts and crafts making, such as jewelry making, rug weaving or cabinet making.
• Tutoring.
• Music and dance instructors.
• Childcare. Some states have court holdings and statutes preempting local restrictions (for example, see In re Herrick, 742 A.2d 752 (Vt. 1999)).
• Computer programming, graphic artists, data processors and general computer use as the business itself.
• Cottage (home-based) food businesses.
• Plumbers, electricians, and HVAC contractors.
• Private investigators and bodyguards.
• Nutritionists and personal trainers.
• Certain professions practiced by those with specialized education and training, such as:
  • architects, landscape architects, and engineers;
  • lawyers and accountants; and
  • insurance agents (Arceri v. Town of Islip Zoning Bd. of Appeals, 791 N.Y.S.2d 149 (2d Dep’t 2005)).

Traditionally Banned Occupations

Cities have long banned certain businesses and occupations as inappropriate for the home and residential neighborhood, such as:

• Animal clinics and kennels (Matthew v. City of Jennings, 978 S.W.2d 12 (Mo. Ct. App. 1998)).
• Riding academies (Laver v. Zoning Comm’n of Town of Redding, 600 A.2d 310 (Conn. 1991)).
• Doctor and dentist offices (Falmouth v. Long, 578 A.2d 1168 (Me. 1990)).
• Beauty shops or barber shops.
• Tattoo parlors.
• Adult oriented businesses
• Exterminators (Mack v. Bd. of Appeals, Town of Homer, 807 N.Y.S.2d 460 (3d Dep’t 2006)).
• Hotels and motels.
• Bed and breakfasts (Reynolds v. Zoning Hearing. Bd. of Abington Twp., 578 A.2d 629 (Pa. Cmwlth. 1990)).
• Mortuaries and funeral homes (Hughes v. Zoning Bd. of Appeals of Vill. of Waterville, 631 N.Y.S. 2d 1009 (Sup. Ct. Oneida Co. 1995)).
• Junkyards.
• Auto repair shops.
• Restaurants.
• Retail sales. For example, while an art gallery is usually allowed, a home principally selling stained glass windows on site is not (Narbonne v. City of Rye, 534 A.2d 388 (N.H. 1987)).

Regulating by Performance Standards

Modern ordinances tend to regulate home-based businesses by their impact to the area rather than by specific occupation or industry. Basing the allowable uses on performance standards offers flexibility for, among others, working parents and computer-using workers, while still protecting the desired home life of the residents.These performance standards often fall within regulations governing traffic in the residential area or the home business’s external appearance.

Traffic-Based Requirements

Local governments may implement traffic-based requirements to minimize any traffic or parking problems a commercial use could create in a residential neighborhood. Rules seeking the maintenance of an easily accessible and calm residential environment include:

• Locating parking spaces for clients, customers, or nonresident workers off the street.
• Limiting the number of client or customer visits per day.
• Banning unloading of trucks (Agnew v. Bushkill Twp. Zoning Hearing Bd., 837 A.2d 634 (Pa. Cmwlth. 2003)) or use of commercial vehicles.
• Limiting the vehicular trips generated by the business.

Maintaining Residential Appearances

Neighbors may complain about obvious external evidence of nonresidential uses, so regulations may address that issue by:

• Requiring that the occupation not interfere with the residential character of the home and neighborhood, especially the exterior appearance.
• Requiring home occupations to obtain a permit.
• Banning any heavy mechanical or electrical equipment.
• Banning signs or ads appearing outside except an unobtrusive sign displaying the business’s name placed flat on the residence.
• Prohibiting flashing lights, animation, and video sign projections.
• Banning outside storage or display.
• Banning creation of smoke, fumes, odors, dust, loud noise, vibrations, or glaring light.
• Banning electrical interference including visual or audible interference with radio or television receivers or fluctuations in line voltage.
• Banning discharge or storage of hazardous waste.
• Precluding the generation of solid waste or sewage discharge, in volume or type, not normally associated with residential use.

Rules governing the home business’s external appearance are common city regulations. However, many cities go further and try to carefully manage business practices within the home, such as:

• Regulating traffic and commercial appearances.
• Requiring that all workers are:
  • residents of the home;
  • family members; or
  • limited in number if they are nonresidents (City of White Plains v. Sassuwer, 467 N.Y.S.2d 418 (2d Dep’t 1983)).
• Allowing business operations to occur within the home or an approved accessory building, but not in more than one structure.
• Limiting the business use of the home by not allowing the use to exceed a given square footage or percentage of floor space, often 25%.
• Limiting the types of goods sold or offered for sale to those produced on the premises.
• Allowing only a single business in the home.
• Banning doctor’s and veterinarian’s offices in the home.

Procedural Options

Decision Making Mechanisms

Localities have various processes for granting permission to home-based business applicants. They may use a permitting system or simply inform the applicant if the use is allowed.

Local officials grant permission by:

• Administrative approval by staff.
• Automatic referral to the zoning board for a public hearing.
• Referral to a zoning board if any or a certain number of neighborhood complaints are received.

Procedures for Partially Continuing Allowed and Banned Uses

Performance standards for businesses and occupations (see Regulating by Performance Standards, above) can apply to all proposed uses. Performance standards may be used in addition to or in place of listing allowed and banned uses.

Allowed Uses

If a use is allowed to continue without oversight, a home-based business can become a problem, even if there is no problem when the business begins. When a business is required to renew a permit annually, the local government can use performance standards to review the use to ensure that it is still compatible with the neighborhood. Other options for applying easier standards include:

• Allowing some uses in particular residential zoning districts and not others, such as a district with the least dense housing where complaints from upset neighbors about unexpected noise and traffic are less likely.
• Having a multi-tiered approval process where some uses are administratively approved by local staff, while other uses must be approved by the zoning board with input from the public at a public hearing.

The different types of customary home businesses in such a system can have names such as:

• Level 1 and 2.
• Major and minor.

Banned Uses

When the proposed use is banned, business owners will sometimes ask local officials for a chance to show that their operations can satisfy the multiple concerns represented by performance standards. A city with a list of banned uses is likely to continue to consider some uses completely inappropriate for residential areas and failing performance standards on all levels. For more borderline uses, especially professional and small retail operations, a city could allow an applicant a chance to show compliance with performance standards. Options for doing this include:

• Disallowing administrative approvals but allowing an applicant to go before a zoning board to prove, possibly by a substantial evidence standard, that their uses meet performance standards. See ZBA Home Business Regulations Atkinson, NH, Fairfax County, VA Home-Based Business Regulations and Schumburg, IL Special Use Approval.
• Allowing hardship cases to proceed to a hearing in more dense residential districts or districts of mixed home and business uses.

Variances, Special Use Permits, and Zoning Board Hearing Procedures

Variances

In some cities, proposers of banned uses have the option for applying for a variance to deviate from strict compliance with the home business portion of the zoning ordinance. The factors used to grant variances are more ambiguous than the performance standards generally used for home business applications. State law often forbids use variances, reserving the variance procedure for items such as reducing setback lines.

Special Use Permits

Some cities require owners to apply for conditional or special use permits to operate home-based businesses in residential areas. The zoning board deciding these specific cases should:

• Consider whether the owner’s proposed use is compatible with the surrounding areas or if it would have a significant negative impact (see Banned Uses, above).
• Determine whether the application complies with the performance standards listed in the ordinance instead of the standards used for variance cases. Failure to meet any one of the conditions for a special use permit included in the zoning ordinance is sufficient basis for the zoning board to deny the special use permit application (Navaretta v. Town of Oyster Bay, 898 N.Y.S.2d 237, 240 (2d Dep’t 2010)).

Zoning Board Hearings

Zoning boards must hold zoning board hearings to review and make decisions on variance requests and special use permits. These hearings are normally open to the public in accordance with the state open meetings laws. At these hearings, neighbors are given the opportunity to testify about their concerns about a proposed home business use before a final decision is rendered.

Counsel for the zoning board should carefully prepare board members for these hearings, especially new members. Board members should be advised to be careful and noncommittal with their remarks from the dais. Courts have used board remarks to support holdings overturning board decisions citing bias against the person seeking relief or facing sanctions from the board. For home occupation hearings, counsel should also remind the board not to ignore:

• The factors in the ordinance’s listed performance standards.
• The evidence presented by the proposer and the use’s opponents at the hearing, especially if the ordinance or the issue have no listed, specific standards.

(See Navaretta, 898 N.Y.S.2d at 237 (2d Dep’t 2010).)