For business owners, deciding where to set up an office is an important management decision. For smaller companies, the high rent of office buildings can be a hurdle, so many consider the option of using an apartment as an office. However, when a residential property is used as an office, there are points to watch that differ from ordinary residential use. This article explains the basic information on using an apartment as an office and the key points you should understand in advance.
What is the difference between properties that allow office use and residential-only properties?
The main difference between properties that allow office use and residential-only properties lies in tax matters such as fixed asset tax and consumption tax. When registering a property, the owner must state its intended use, and when it is rented out for office use, the fixed asset tax rate tends to rise. In addition, rental income from office use is subject to consumption tax, while rental income from residential use is tax-exempt.
Please note that using a residential property as an office without permission constitutes a breach of contract. Failing to apply for a change of use may also lead to tax-related problems.
What differences are there between business-use properties and residential properties?
Difference in intended use
Business-use rental properties are properties used "for commercial purposes," so the contents of the lease agreement and the screening process differ from those for residential properties. Because many people come and go, the property is more likely to wear down, and rents are generally set higher than for residential properties.
Difference in initial costs
Business-use properties involve higher initial costs than residential properties. The main cost items are as follows.
- Security deposit
- Key money
- Brokerage fee
- Prepaid rent
- Fire insurance
- Administrative fee
Restoration obligation when moving out
For business-use properties, the scope of restoration to the original condition tends to be broader than for residential properties. If interior construction or equipment changes have been made, there are many cases where everything must be returned to its original state.
Why do landlords dislike office use in residential properties?
The main reasons landlords tend to avoid office use are as follows.
- Higher tax burden：When a property is used as an office, the fixed asset tax rate increases, which raises the owner's burden.
- Traffic by an unspecified number of people：This may affect the living environment and security of other residents.
- Risk of violating building management rules：In many cases, the condominium management association prohibits office use.
- Decline in property value：Use by an unspecified number of people may accelerate deterioration of the building.
Is it also prohibited for telework or side jobs?
If you use your home for telework or a side job, it generally does not count as office use. However, caution is required in the following cases.
- Businesses that have visitors from an unspecified number of people
- When putting up a sign or nameplate
- When using the address for corporate registration
Check the prohibited items in the lease agreement, and if the judgment is difficult, consult the owner or management company in advance.
What are the risks of registering a company at an apartment address?
If you register a company at an apartment address, the following risks arise.
- Possibility of contract termination：If it violates the building rules or the lease agreement, you may be asked to move out.
- Public disclosure of the registered address：Because a corporate registration address can be viewed by anyone, privacy issues may arise.
- Mail-related issues：A large volume of mail addressed to the company may arrive and affect other residents.
What can you do if office use is not allowed?
If it is difficult to use an apartment as an office, consider the following alternatives.
- Virtual office：A service that lets you rent only an address and phone number, and it can also be used for corporate registration.
- Rental office：You can use an office equipped with the facilities you need for a monthly fee.
- Coworking space：You can use a shared workspace at a relatively low cost.
- SOHO-friendly properties：Another option is to look from the start for a property that can be used as both a residence and an office.
What should you check when choosing an apartment that allows office use?
When choosing an apartment that allows office use, check the following points.
- Contents of the building management rules：Check specifically what kinds of businesses are permitted.
- Internet environment：Make sure the communication speed required for your business can be secured.
- Access and location：It is important to choose a location that takes visits from clients and business partners into account.
- Security：You should also consider the safety of the information and documents handled in your business.
What are the increasingly common "SOHO-friendly properties"?
SOHO (Small Office/Home Office)-friendly properties are properties that can be used as both a residence and an office. Compared with ordinary apartments, they generally have the following characteristics.
- Office use is permitted under the building management rules
- Some properties allow corporate registration
- Rent is lower than in office buildings
- Because you can also live there, housing costs can be consolidated
However, there may be restrictions depending on the type of business, so before signing a contract, explain your specific operations and confirm the details.
Frequently Asked Questions (FAQ)
Is using an apartment as an office illegal?
Under the law, it is not illegal unless there are restrictions under the Building Standards Act or zoning rules. However, if it is prohibited by the lease agreement or the building management rules, it constitutes a breach of contract.
Are properties that allow office use more expensive?
Compared with residential properties of the same location and size, rents tend to be about 10〜30% higher. You also need to consider that consumption tax is charged separately.
Does doing freelance work from home count as office use?
If there are no visitors, no sign is displayed, and the primary purpose is residential use, it is generally considered acceptable even though it falls into a gray area. However, check the contents of the lease agreement, and if you are unsure, consult the owner.
