“Do I really need a business license?”

Photo by PoPville flickr user Kevin Wolf

“Dear Popville,

I have a tenant who is also my roommate in a 2 bedroom condo. I collect rent from her and all is honky dory, I don’t anticipate any issues and I am always fast to resolve maintenance concerns. It has come to my attention that, although I am only renting out one room, and I live in the unit, I still might need a basic business license. This makes no sense to me, as rooming houses (group houses with multiple occupants) do not require a license. I would really like to not do this for a number of reasons. 1. It seems stupid and unfair. 2. It requires an inspection. 99% of my condo is perfectly fine. However, there are grates over the window in the rental bedroom. My building is a registered historical building with the L’Enfant trust and I cannot make changes to the facade without special permission, which I will be unlikely to get in time for the inspection. I know the reason for the grate regulation is to be able to escape in case of a fire, but the bedroom is pretty much right next to the front door, and the window is probably too small and high up for someone to climb through anyway.

So, do I really need a business license? If I chose to not get one, what is the worst case scenario I might face? If I chose to not get one, should I still report rental income to DC?

I could really use some advice! Having had some shitty landlords myself, I am really dedicated to being a good and attentive landlord, but this just seems excessive.”

79 Comment

  • Yes, you do. Don’t ask don’t tell is how I live though.

  • Actually you’re supposed to but no one does. But now that you put it out there you probably should or DCRA will eventually come for a visit.
    But an even better reason for doing so is that should your house burn down because of your tenants, you’d better hope you’re rental situation is on the level and that your insurance policy is correct according to the occupancy in the home (rental vs owner occupied). Otherwise you will lose your butt.

    • I doubt DCRA has that much time on their hands that they’re going to sludge through their paperwork of historic buildings to find me. But for arguments sake, what would be the difference between a roommate situation like this and one where you are living with an unmarried partner? I think most people would still collect some sort compensation from their partner. Would that require a business license? If so, that is beyond ridiculous.

      I’m confused by your comment in regards to the insurance policy. Wouldn’t my homeowners insurance protect my home in case of a fire?

      • Insurance will protect you unless they can find a legal loophole that absolves them from a payout. Failing to disclose that you are renting may just be that loophole.

    • But it’s owner occupied with a roommate. I think he’d be ok on the insurance side as I’ve never heard of a owner occupied+ roommate option on any policy. They just ask if you live there which he does.

      • Some insurance policies have riders for tenants living in the house. Mine doesn’t but I have disclosed my tenets to them and gotten a giant liability limit in case of damage from tenants

  • If you aren’t licensed, you can’t raise rent and you can only kick someone out if they don’t pay the originally agreed to rent. So you could be stuck with your roommate long after you want them gone

    • It seems difficult enough to evict a tenant anyway for anything other than nonpayment of rent. So, essentially having a rental without a business license is legal, you just can’t legally raise the rent on your tenant? Did I understand that correctly?

      • Amen brother/sister. You get NOTHING for registering and following the rules. Except screwed.

        • I guess it protects you from your tenant being a crazy weirdo who will stop paying rent and purposely try to screw you over. But, I feel that is kind of unlikely to happen as long as you’re not a terrible landlord. Mutual respect and it seems like everything should be fine.

  • Not doing this is going to screw up your insurance and paying your taxes on your rental income.

    • For taxes, what can he deduct against the rental income…half the expenses? I’ve been curious about that side of the roommate situation.

      • According to my accountant, she did deduct the percentage of rental of my expenses. So, if the sq footage used by my roommate is 50%, I can deduct 50%. If it’s 70%, I can deduct 70%, and so forth. But we generally split the expenses anyway (other than a few upgrades that I did after she moved in), so it really didn’t make a huge difference.

        • I deduct the portion occupied by the tenant, and then half the portion they use on the common areas.

          So, say they have 30% of the house as a bedroom, I have 30% for my bedroom and 30% shared space. I deduct 45%.

          If IRS ever came calling I would have good faith justification for it. They might disagree but it isn’t nefarious.

    • False. Just report the income. DCRA and OTR do not talk to each other (or haven’t YET).

  • I don’t think you need a license. If it is a personal matter between two friends or acquaintances then you don’t need a license. Like suppose a friend of my adult son needed a place for the summer, and I allowed him to live in my extra bedroom and pay some rent in exchange. I don’t think the city regulates that.

    And if it is regulated, then it’s nuts.

    • Yes it is regulated. Even renting a room requires a Business License as a commercial operation. This is for two reasons; 1. DC can guarantee the place is habitable and safe for renal purposes and 2. they get fees.

      Plus if you rent a room without one, it may cause an issue with home owner’s insurance should the renters stuff be damaged.

      • This is pure fearmongering. I want someone to do a statistical analysis of the number of unlicensed property deaths in DC over the last decade. There is absolutely no proof that this is the case.

        The DCRA, BBL process is broken. As clearly evidenced by the sentiment that a summer student rental in an otherwise legal house isn’t allowed without endless paperwork and hassle. And bi annual inspections. And an application to DCHD for rent control. And so on.

      • Safe for renal purposes?! What kind of places do you live?

        (I know it was a typo. It just cracked me up.)

      • My renter has rental insurance for her things.
        The thing I don’t understand is why this isn’t required for all times of landlords, especially rooming houses. I mean, honestly, what is more of a business? Me collecting rent from my roommate (or let’s say for argument’s sake, my unmarried but cohabiting partner) or a landlord collecting rent from 5 tenants?

        • I’m not sure why you think that this isn’t required of landlords of group houses. I’m pretty sure that landlords need business licenses in those cases as well.
          I was also under the impression that you don’t need a business license in your case because you’re renting out a room in your space, rather than a separate unit. (probably from the same source as jcm below) I was surprised to read so many opinions that it is necessary, even for shared space.

          • DCRA specifically states on their website that you do not need a BBL for a group house. On top of that, I asked my friends who live in group houses to search their landlords in the database, and none of them are licensed.

            I have combed the DCRA site through and through and found nothing that states that if the space is also owner occupied that it is either included or excluded from BBL regulations. Logic would dictate that it’s not included, a roommate arrangement is not a business. If anything, I have the same vested interested as my roommate to have my own living quarters be safe and functional. BBL and DC tenant law is there to protect the tenants. Out of all the rental situations in the city, mine is the MOST tenant friendly. If my disposal is broken, I want it fixed too, as opposed to the landlord of a group house who is happy to sit and wait on it. The only thing I have seen is these comments from DCRA on their Rent My Basement blog that explicitly state that roommate situations are excluded…. so I guess I can reasonably say that they themselves put information that states my situation is excluded.

          • Where exactly on DCRA’s website does it exclude group houses from BBLs? Because if you rent out the entirety of a single family house, there’s a “one-family rental” BBL that doesn’t distinguish between related and unrelated tenants.

          • And before you seize on “one-family” as meaning a literal family, it’s a term of art in real estate. It’s to distinguish it from multi-unit buildings.

          • “On top of that, I asked my friends who live in group houses to search their landlords in the database, and none of them are licensed.” That doesn’t necessarily mean anything. I live between two group houses, and not only does neither landlord have a BBL, both are getting the homestead deduction even they don’t live there! (One is getting the senior citizen deduction thing too.)

          • Oops… I meant “even *though they don’t live there.”

          • http://dcra.dc.gov/service/get-one-family-rental-license
            This classification applies if you own and rent out single-family homes, town houses, duplexes, individual condominium units or individual rooms. A Basic Business License is required for each rental location. This classification does not include Apartment Houses (with three or more units) or Rooming House (with six or more occupants).

            Maybe I misinterpreted that, but it seems telling that none of the landlords of group houses that I am personally aware of are licensed. And one of them was formerly sued by his tenants, so that tells me that if he was required to get licensed, he certainly would have after that point.

          • The landlord of my group house has a BBL for each of his properties in the District. I’m 100% certain he is required to have one. It would be absurd that an an overseas owner of a 1BR condo is required to have a BBL to rent it out, yet a SFH would not require it.
            Also, I think “boarding house” that you refer to is a distinct designation in the DC housing code. It refers to a short term, rooming house that’s run like a hotel (e.g., a bed and breakfast). IIRC, those are governed by separate regulations due to their hotel-like nature. “Boarding house” is not the same as a “group house.”
            Interestingly, group houses are not even mentioned in the DC housing code. They are treated as a SFH with joint and several liability, as if the group that compromises the house is only one person for legal purposes. I only know this because we had a problematic roommate that we needed to evict from our group house last year. We did not want to re-sign the lease with him, but he wanted to stay. He threatened to sue and involve the Tenant Advocate. Fortunately, our landlord’s lawyers looked into the matter and they concluded that we could force him out (without a formal eviction by the Marshals) so long as it was the tenants – not the landlord – did the evicting. We were under no obligation to re-sign the lease with this individual.
            In terms of housing law, “group houses” are wild west and it would be helpful if the city drafted specific regulations to deal with them. There’s a very real lack of clarity on how to handle them.

          • This is interesting. I can’t believe there is such a lack of regulation when it comes to group housing, considering it is pretty much THE housing choice for so much of the city for many years now. It seems like a lot of people are in my situation as well, a roommate/tenant, but DCRA really doesn’t have anything that specifically addresses that issue, other than a 5 year old comment on their blog excluding roommate-landlords from the BBL. It seems pretty unfair to expect someone to get a BBL for something that they cannot reasonably be sure applies to them.

          • There’s not a lack of regulation, only your willful ignoring of what’s on the books. If you have friends that have landlords who have failed to get a BBL, so be it, but the rule is clear. And not having a BBL probably wouldn’t come up in court. Housing violations, sure, but the BBL is an administrative requirement that most judges couldn’t care less about unless DCRA is a party.
            And forget “their blog.” That blog was maintained by someone who hasn’t worked at DCRA for a few years now and it shouldn’t be taken as gospel at this point. And, if you want to even clearer, the “one-family rental” BBL also includes people who are renting single bedrooms, which would seem to include you.

          • Look, whatever the case is, at some point roommate-landlords were exempt from the BBL requirement. The DCRA blog may not be maintained now, but it was when they posted, so that directive came from the DCRA. If that has changed, which it seems is possible and even likely, the DCRA MUST be clear about that in their documents and they make zero mention of it. I have combed through their website through and through. It is not there. I remember living in Virginia when they raised the driver’s license age to 16 and 1/2 or whatever it was, and it was everywhere. Considering how widespread this situation is in DC, it is highly irresponsible of the DCRA to not address it.

          • “This classification does not include Apartment Houses (with three or more units) or Rooming House (with six or more occupants).”

            That doesn’t mean that apartment houses and roominghouses (which are *not* the same as group houses, they’re more like an archaic form of extended-stay B&B in modern-day terms) are exempt from licensing — it means they don’t qualify for the simpler form of business license that is available to landlords of single-family homes (i.e. houses or condos rather than multi-unit buildings).

            The fact that your friends’ landlords are unlicensed should be in no way surprising; the vast majority of house rentals in DC are unlicensed and illegal. Enforcement is weak and capricious, but that doesn’t change what the law says. Just because you know ten people who have driven an entire circuit of the Beltway at 100mph and not gotten a ticket doesn’t mean there’s no speed limit.

          • Well, one of the things that is weird to me is that this law is actually unenforceable when you consider the simple size and manpower of the DCRA. You can’t spit in the city without hitting a housing situation where the landlord lives in the same home as their tenant. It is just way too common. If every one of those people applied for a business license and inspection, the city would never keep up. If that many people drove over 100mph on the beltway, the speed limit would also be unenforceable.

  • You don’t need a business license if you live there. Here’s an answer from DCRA on their “Rent MY DC Basement site”:
    If you’re the homeowner and live there, you can have roommates and not have to get a license. There are different limits on how many based on size of home and also zoning, but essentially not more 6 unrelated people. So sounds like you’re good to go. The basement apartments we’re talking about are completely separate apartments. If have just a bedroom downstairs and you share the rest of the house, the licensing rules do not apply. However, many of the safety related issues are important and you should certainly review them and make sure the basement is safe, get smoke detectors, etc. Thanks so much for your comment.

    • Thanks for that!

    • Wrong. One of my neighbors was just fined $6,000 by DCRA for not having a business license, and other various issues such as hard wired smoke detectors, etc. She was renting the back room of her home, with a shared kitchen and bathroom. Should they have cause to inspect you (such as a tenant complaint in her case), you WILL get fined.

      • They didn’t give her a chance to get the license?
        Someone reported me, and I was able to avoid the fine by getting everything in order.

      • Interesting. I can’t imagine a situation where my roommate wouldn’t go through me first, before complaining to the city. I’ve been pretty fast on fixing everything she’s had issues with. Are there other reasons why they would have an inspection?

        Before I bought my place, I lived in a building in NE, which had dozens of violations and were refusing to fix a number of issues with my unit, so I called the inspector (after trying a number of times to get them to fix the problems themselves). Despite being a prominent conglomerate of apartment buildings, it seems like they never had the space inspected, otherwise, I’m not sure how it could have possibly gotten to that state.

    • Thanks so much! Do you mind sharing the link? I would very much like to read what DCRA has to say and have had a difficult time finding something on this specifically. It’s a regular condo in a small building, so the bedrooms are on the same floor, but we generally share all the common space. There is no separate entrance to the “rental bedroom.” I’m pretty much up to code in everything else and even have a security system, so we’re pretty good. A good friend of mine is a licensed DC PM and knows the code front and back and helped me pick out this condo. Everything is good, it’s just this one darned window. I even tried to get the previous owner to fix it before I moved in, but was told this was not possible because of the historic building designation.

      • If you want to be certain, I’d recommend going to DCRA and just asking in person. If you need a BBL they will actually help you walk through the process.

        • I worry they will just say “yes you do,” just to collect the fee, even when I really don’t need one (for example, if all it is is that I can’t raise the rent, I’m fine with that). Then if I don’t do it they will track me down. Maybe I’m being paranoid.

        • Never ask just one person at DCRA – always ask at least 3 as you will get different answers.

      • I found two comments on their site where they say you don’t need it. But based on SW DC’s report, maybe that’s no longer accurate? Anyway, here they are:
        If you’re the homeowner and live there, you can have roommates and not have to get a license. There are different limits on how many based on size of home and also zoning, but essentially not more 6 unrelated people. So sounds like you’re good to go. The basement apartments we’re talking about are completely separate apartments. If have just a bedroom downstairs and you share the rest of the house, the licensing rules do not apply. However, many of the safety related issues are important and you should certainly review them and make sure the basement is safe, get smoke detectors, etc. Thanks so much for your comment.
        If you’re renting just a room, you essentially have a roommate and you’re sharing the living quarters so you would not need a BBL. You can have essentially up to four unrelated people living with you without having to get a license as long as your living there and sharing the kitchen, bathrooms, living space. A basement apartment is a separate unit – dwelling unit – and you do not share the rest of the house. If the room is in the basement, it should still meet basic housing codes or it could be dangerous.

      • Presumably poster meant this site:

        In the comments there is some back and forth about whether business license is necessary, starting with:

        dcracommunications | April 29, 2010 at 2:46 pm | Reply

        The codes were written specifically for basement “dwelling units” and are specifically singled out in the codes. The window bar rules do not necessarily “fail” the unit if the unit has legal egress that does not include the windows as emergency egress. This is not a deal breaker as long as there are suitable other means of egress. If you live in the main house, you do not need a license for your own home. Not sure where that is implied in any way. People who all live together in a home and have housemates does not require a business license – in this case the basement is not a separate dwelling unit. If you have a kitchen, bathroom, etc. in the basement and it is clear that this is being used as a separate unit it would be tough to make the argument that you’re housemates though. If people share the whole house, this means they spend a limited amount of time in the basement. That’s the theory behind the codes. If they spend all their time there – it needs to support that level of use.

  • Technically, I suppose you do. But if you are nice to your roommate, you can probably get away without it.

    Don’t forget to pay taxes on the rental income, though.

  • Thank you to those that have responded with their advice so far! If anyone has any experience with issues related to making changes to historic buildings in order to comply with the code (the grate issue), I would be very interested to hear them.

    • By “grate” you mean “window bars,” right? You can get a contractor to retrofit/replace your window bars so that they can be opened from the inside with a “thumbturn” lock. Or you could have the bars removed completely.
      It sounds like either of those options is going to require you to get an OK from the HPRB, but just to cover yourself, I’d pursue it. If there is ever a fire and your roommate dies because he couldn’t get out the barred window, you could go to jail. (That’s what my real estate agent told me when advising me to retrofit or remove my window bars if I wanted to rent out my basement bedroom.)

      • Yes, I do mean window bars. I actually called the inspector on my last place for a different reason and they fined them for having incorrect window bars. However, if there was a fire in my bedroom in my old apartment, 1. there would be literally no other way to get out other than the window, and 2. It was actually large enough for a human to easily get in and out without the bars (as demonstrated in weird twist of fate when some thieves used the new safer window bars to break in while I was at work). This is not the case in her bedroom. It is right be the front door, and I have serious doubts that window would be accessible anyway, even without the bars.

        • I think bedrooms are supposed to have two means of egress — usually this means a door and a window. IIRC, there’s a minimum space requirement (# of square feet) that a window has to be to count as a means of egress. If that window is too small anyway, then maybe the bars don’t matter.

          • Would that mean the entire room is illegal to rent unless I break out a new window? Cause I’m pretty sure THAT definitely wouldn’t fly with the historic homes folks.

          • Yeah, it might mean that the entire room is not legal to rent (as a bedroom).

          • Well, I know the condo was a rental before. All signs are pointing towards this just being a bs process.

          • Legal rental? Even if it was, I see nothing stopping the previous owner from just saying that’s not a bedroom as long as there is another legal bedroom.

          • A previous owner might have rented it out as a “1 bedroom plus den.”

          • I suppose that is possible. It’s is the bigger room, the one connected to the bathroom and the one with a larger closet. I mean, I *guess* you can say it’s a den, but anyone with a brain would know it’s supposed to be the master bedroom.

  • Short answer. Yes, you do, even if you are just renting a single room. Should DCRA have a reason to inspect (tenant complaints for one), you probably will end up paying a few hundred in fines. I believe they also have requirements such as hard wired smoke detectors, etc.

    In OP’s case, I would think you could remove the window bars without violating the “historical” properties of the house.

    • The bars was something I tried to get fixed when I first bought the place, but the previous owner told me that this was not possible due to the historic building designation. I think the problem is that you would have to replace them with breakaway bars, which would change the facade.

      • I wouldn’t take the previous owner’s word for it — see if you can get a definitive answer from the HPRB.
        HPRB would probably allow you to remove the bars, but if you’re at basement/ground level you might not be comfortable with that.

      • I think what you have is different from a garden-variety historic designation. Your mention of the L’Enfant Trust indicates that a previous owner likely granted them a facade easement, which comes with much tougher restrictions. For example, my house is within a historic district and I’ve checked with HPO staff several times about removing and replacing security bars and doors. Each time they’ve told me that HPRB doesn’t have enforcement jurisdiction over those features. Historic preservation facade easements, however, would cover those (and a lot more — flower boxes, flagpole brackets, etc.).

  • Related to this inquiry, does anyone know if it’s ok to obtain a business license for a property that is already rented? By rented, I mean that there is a tenant already living in the unit (I do not live there with the tenant). I suppose I could just make sure the tenant is not there when the “inspection” takes place.

    • Yea you can, and the tenant can be there. The form will ask if it’s occupied. They need to sign off on the form to give permission for entry. I gather your fear is that you’ll be fined for being unlicensed during the process. I had no violations, and I was reported, but I was able to get it taken care of quickly and wasn’t fined. I didn’t know at the time that a license was required.I think you’ll be ok.

  • I JUST did this. It takes about 20 min, its $190 for 2 years. I find the peace of mind from being legal worth it

  • What if you’ve been renting out a basement for a couple years and haven’t done this. When you show up to get a CofO etc and BBL do you get fined retroactively or are past transgressions forgiven?

  • I would recommend telling your insurance company that you have a roommate and declaring the income on your taxes, but NOT trying to get a license from DCRA.

    • That’s been the plan! My insurance already knows and I’m already planning on reporting the income.

  • Related question: If my girlfriend comes to live with me and pays some minimal rent do I have to declare that as income on my taxes? If so, would it make a difference if we were married? I do have another unit in the house (has BBL and CofO) and pay taxes from that income.

    • I would check with an accountant on that but my guess is no because you are sharing all space and all expenses. If that isn’t the case, I feel pretty confident saying you would not have to declare the income if you were married.

  • Just do it. The process isn’t that involved. You have no legal protection otherwise even if they don’t rent

  • Deaths due to lack of egress aren’t fictional. The things that are difficult and/expensive to change – hard-wired smoke detectors and bars on the windows can make a huge difference in the case of fire. Of course you don’t foresee a fire in your home, no one ever does, but it still happens. From one landlord to another – whether you register or not it is your responsibility to ensure that you are providing a safe rental environment. And the room being next to the front door doesn’t cut it. (I am licensed btw.) An example: http://www.washingtontimes.com/news/2011/feb/5/dc-fire-kills-child-after-window-bars-trap-family/

    • Look, I really get it. I actually had an inspector come and fine my old apartment that I was renting for that exact reason (and dozens of other violations). If a fire were to start, and the bars on the windows were off, I’m not sure someone could climb out in a timely manner anyway. I wonder if you might know, the bedroom has two doorway exits, one to the hallway and one to the bathroom that also has an exit to the hallway. Do those count as two separate egresses? We have an additional exit in the back of the unit, through my bedroom. Logic would dictate that if a fire started at the front of the home, the tenant could still exit through the back. If it starts at the back, she could exit through the front door.

  • From https://rentmydcbasement.wordpress.com/stumbling-blocks/#comment-454 :
    PLR | September 14, 2010 at 12:55 am | Reply
    There is a lot of confusion about getting a business license. If we rent out a room or a suite in our house to a border do we need to get a business license?
    Is an inspection of the premises required?
    dcracommunications | September 14, 2010 at 7:57 pm | Reply
    No, you can have a boarder – up to 3 – without needing to get a license as long as you live there. The boarders need to have access to the whole house. Hope this helps.

  • HaileUnlikely

    I have received contradictory information from two different DCRA employees about this, and from the information on their web site, I cannot decipher the language. I believe the legal answer is dependent upon the legal definition of “offer for rent.”

    • What could possibly be a different definition of “offer for rent?” I’m genuinely curious. I’m more thrown by their use of “individual rooms” because that could mean you live in the home and rent an individual room, or you have separate rental agreements PER room with each tenant. Especially considering that 1. Clearly this is something people in DC do, and 2. there was a point at which DCRA said roommates do not count as single family homes, it is just incredibly irresponsible for them to not address it.

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