Airbnb Lettings Boom or Doom?

Airbnb Lettings Boom or Doom?

Airbnb is a bed and breakfast concept that allows people to list their residential properties and rent them short-term. The business has become increasingly popular, providing the opportunity of additional income for leaseholders. Despite the boom of the online marketplace, there are serious concerns about leaseholders arranging Airbnb lettings which do not comply with the terms of their lease.

Unlawful lettings can give rise to a number of issues:

Nuisance can cause difficulties for landlords, freeholders and management companies as guests can cause a nuisance, annoyance or disturbance to other residents.
Insurance issues can also arise as a leaseholder will be prohibited from doing anything that will void the property's insurance policy.
Alienation is a clause in some leases which restricts assignment, subletting or sharing or parting with possession of part or the whole of the property without the landlord’s prior written consent.
User is a clause requiring the property to be used for private dwelling and prohibiting any trade or business use.

The recent case of Nemcova v Fairfield (2016) UKUT 303 (LC). involved a tenant in a large block of flats where other lessees complained to the Landlord regarding the use of the flat for Airbnb lettings. The tenant stated that she had only made seven lettings over the period of 12 months, and that she had her own website insisting that most were to business users and not holiday guests. The key question in the case was whether the tenant was in breach of her lease provisions?

The relevant clause was in standard wording: "not to use the demised premises... for any purpose whatsoever other than as a private residence." However, there was no provision in the lease prohibiting sub-letting. The tenant argued that the flat retained its characteristic as a private residence and she was therefore not in breach. She continued to add that there was no difference between a short-term Airbnb let and an assured shorthold tenancy which would be permitted.

The Upper Tribunal decided that the definition of private residence depended on a number of factors:

The length of a lease.
If there is a covenant against sub-letting or alienation.
The position of the other lessees in the block.
Most importantly, the duration of the short term let.

The Upper Tribunal outlined that the motive of the Airbnb guest to stay for commercial or holiday use and the payment of the commercial fee were both irrelevant. The Upper Tribunal adopted the approach in Caradon District Council v Paton [2000] 3 EGLR 57 where it was stated that an assured tenancy of six months is likely to be used as a home and a holiday let of one or two weeks would not.

The Upper Tribunal concluded that "there must be a degree of permanence going beyond being there for a weekend or a few nights in a week.... I do not consider that where a person occupies for a matter of days and then leaves it can be said that during the period of occupation he or she is using the property as his or her private residence. The occupation is transient, so transient that the occupier would not consider the property he or she is staying in as being his or her private residence even for the time being." The tenant’s appeal was dismissed and she was found to be in breach of her lease.

It seems clear that in most cases an Airbnb letting will be in breach of a 'private residence' user clause. However, the longer the letting the less danger there is of there being a breach.

Enforcement

Should a Landlord wish to exercise his or her right to take enforcement action against the leaseholder who has breached the terms of the lease, then an injunction can be sought to prevent the breach or a section 146 notice can be served on the leaseholder to issue court proceedings to forfeit the lease.

Although Airbnb has become globally recognised and used, non-compliance of your lease can lead to breaches and possibly court action.

If you require any further advice on unlawful lettings or any other property matters, then please do get in touch with our Property Lawyers who will provide the best advice and solution for you.