To Airbnb or not to Airbnb? New case law
As a consequence of the recent change in the planning law within London, there has been a reported increase in property owners using Airbnb or similar sites to make income from their properties. My previous article emphasised the need for any such property owner, where that property was leasehold, to very carefully check (and, if appropriate, seek specific legal advice on) the restrictions contained in their lease. Since then further clarity has been given in the following two cases as to how such leases may restrict flexible, short-term lettings.
Firstly, Roundlistic v Jones (2016) where the Upper Tribunal of the Land Chamber considered that a covenant restricting the use of a flat had the effect of preventing an Airbnb–style letting, even though there was no express prohibition on such a letting contained in the lease. The relevant provision was for the lessee "… not to use the property otherwise than a single private dwelling house in the occupation of the Lessee and his family". Whilst it would be obvious to most that this covenant would prevent more than one family from occupying the property at any one time, the Tribunal had to consider whether subletting the property as a whole to a stranger (under an assured shorthold tenancy agreement, but equally on short lettings, Airbnb-style) was in breach. The Tribunal held that it was in breach, even though it seemed unfair that no other family but the Lessee could occupy the flat.
Secondly, in Nemcova v Fairfield Rents Limited (2016), the Upper Tribunal gave guidance as to when short term, Airbnb-style lets might amount to a breach of covenant. In this case the lease covenant prevented the Lessee from using the flat "…for any purpose whatsoever other than as a private residence". Again this was a use covenant as opposed to a restriction on subletting. In this case the lease itself did not expressly prevent any subletting. Whilst the Tribunal confirmed that each case was fact-specific, depending on the covenants in the lease, on which the outcome of each case depends, the covenant contained quite common wording. The Tribunal considered that the duration of the temporary occupation was highly material for it to be classified as "a private residence" of the occupier. Occupation for a matter of days, a weekend or a few nights in the week would mean that the occupation is transient and would be far less likely to comply with the covenant. This means that the shorter duration of the letting then the more likely that the tenant would be in breach of the covenant. Nevertheless the Tribunal explained that each lease must be considered in its own context and anybody proposing to let out their property on an Airbnb-style letting should consider all of the terms of the lease (preferably with the benefit of legal advice) before doing so.
After all, the effect of finding that a tenant is in breach of covenant under a lease can ultimately lead to forfeiture by the Landlord and the end of the property owner's lease and asset.
If you have an Airbnb question or property related matter causing you sleepless nights, please contact David Wadsworth or another member of the Property Litigation team.