If she is acting in violation of her lease terms, give her notice and evict if necessary. Check your insurance policy to see what coverage applies to sub-tenants and/or to a business being run out of your house instead of it just being a residential rental - you may not be covered! Time to find out is now, not after you have a claim. Seems to me it is possible that a boarding care business puts a lot more wear and tear on a property than does just a residential rental - another good reason to stop this now! She also may be in violation of zoning laws and codes. To the extent that the City/County cites her for violations, fines her, and she does not pay - will they put a lien on your house because of her? Lots of questions. You should talk to a local real estate lawyer pronto to find out the answers and your best course of action.
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I agree with my colleague. First you should have a local real estate attorney review the lease and facts with you. If she is in violation of the terms of the rental agreement, then your attorney should be able to guide you in undertaking the necessary action, which may be an eviction.
While a day care service, (babysitting), may be run a board and care facility is a horse of a whole different color. A business license would be required and, absent such a business license, the city should be able to shut her down. If your lease agreement prohibits the use of the property as anything but residential and, she is running a boarding care facility, she is in violation of one of the written terms (covenant) of that lease. Your remedy is to serve her with a three-day notice to cure covenant or quit and, upon her failure to shut down the boarding care facility, you can evict her based upon the violation of the rental agreement.
A proper response would require a thorough investigation into the history and background of this relationship. The information provided above is just that, information, to be used as you see fit.