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Lease covenant may prevent Airbnb lettings

Posted on 30 September 2016

Lease covenant may prevent Airbnb lettings

A recent property tribunal decision is likely to be welcome news to landlords and flat owners who have complained of problems arising out of Airbnb-type short term lets. 

In recent years, there has been an increase in very short lettings of prime residential flats.  These can be very profitable for long leaseholders, but the costs could be greater than they think.

Nemcova v Fairfield Rents Limited was a decision of the Upper Tribunal, England's highest specialist property court.  In early September, the tribunal ruled that where a lease says the property must be used only "as a private residence", then the leaseholder is not allowed to rent it out for very short periods.   

Case background

Ms Nemcova owned a flat in Enfield on a 99 year lease.  The lease contained a covenant "Not to use the premises … for any purpose whatsoever other than as a private residence".  Ms Nemcova rented out her flat on websites such as Airbnb, Trip Advisor and her own lettings site.

The other leaseholders in the block were concerned about strangers regularly staying in the flat for short periods.  They asked the freeholder to take action. 

Ms Nemcova accepted that she was granting short term lets, but she still paid council tax and utility bills for the flat and therefore she felt that it was still her main residence, although it was often left vacant.  Most of her lettings, she said, were to business visitors working in London as opposed to holiday lets.  The lease did not contain any specific ban on granting tenancies or licences. 

She also argued that if a flat retains the physical characteristics of a private residence, such as a kitchen, bathroom and living area, then it is still being used as a "private residence" no matter who lives there.

The tribunal's decision

The tribunal decided that the short term lets were a breach of the lease.  Judge Stuart Bridge said:

"In order for a property to be used as the occupier's private residence, there must be a degree of permanence going beyond being there for a weekend or a few nights in the week.  Granting very short term lettings (days and weeks rather than months) … is a breach of this covenant."

It was observed during the case that other leaseholders in the building might well prefer to live with other owner-occupiers or long term tenants, rather than people staying for just a few days.  This matches complaints we hear from flat owners.  Having numerous individuals coming and going and, in the case of secured blocks, having access to the common areas can create security concerns for other leaseholders as well as noise and nuisance issues.  

Often leases contain covenants requiring freeholders to take action to enforce the covenants in the other leases, as in this case.  Each case is fact-specific and will depend on the exact wording of the lease as well as the length of the lettings.  It is likely that a tenancy granted for a term of, say, six months or more will not fall foul of the typical covenant wording, but short lets of a few days or weeks now risk an injunction, a damages claim or even forfeiture of the lease.

Airbnb's "responsible hosting page" reminds all hosts to check and follow local rules before they list their space.  Within Greater London, one also needs planning permission to rent out residential property on short lets, unless these do not amount to more than 90 days in any calendar year.

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