Help! My tenant wants to fill our first rental house with daycare kids!

[Jessica Hinman]

Hello Bigger Pockets gurus!

I've been lurking on Bigger Pockets for months as my husband and I have purchased, renovated, and rented our first two single family properties.  We thought everything was going great until we received a phone call from a neighbor saying that our tenant has started operating a daycare out of our beautifully renovated house!

The back story is a little complicated on this one - we purchased this home as a short sale in early July.  The previous owner decided to walk away from the place after her tenants operated a daycare out of the home and destroyed the place (hence our major renovations).  After advertising our home for rent we got a lot of great interest, and rented to our tenant after a background check and calling all references.  He works for Dora's Daycare (which we thought was quite coincidental) but assured us that his work had him traveling throughout the state helping other daycare centers reach different compliance levels.  I asked both him and his manager at Dora's Daycare if he would be operating a daycare out of our house, and they both said no - LIES!

After receiving the phone call from the concerned neighbor (who was not happy, since I specifically told her her daycare woes were over), I checked with the state and learned that he does have a home daycare permit filed in the county.  

This sucks!  First tenant in our first rental, and it's sure looking like eviction to me.  My question to you bright, wonderful, knowledgeable people is - what the heck do we do now?

We do have a lease, which we got from Bigger Pockets, which specifically states that no businesses may be run out of the home.  Here's the text:

6.USE AND OCCUPANCY:Lessee shall use the premises in such a manner as to comply with all local, county, state and federal laws, rules, ordinances, regulations and codes.Lessee shall not use the premises or permit it to be used for any disorderly or unlawful purpose or in any manner determined by Lessor to be offensive to any of the neighbors.The premises are to be used exclusively as a residence only by the persons named above and their immediate family. NO OTHER PERSONS MAY LIVE THERE WITHOUT THE LESSOR'S WRITTEN PERMISSION.Guests may stay no longer than two weeks. No business or business activity shall be conducted on the premises other than that activity that is customarily considered to be purely incidental to residential use. Lessee may not remove or install any carpet, walls, fencing or flooring without the written permission of Lessor.Red Door Rentals, LLC, reserves the right to perform a visual inspection of the property every 30 days to insure cleanliness and upkeep of home.Tenants, by signing this lease, agree to this monthly inspection. Tenant agrees to perform lawn maintenance for this property.