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Due to the increasing demand for short-term lettings of private apartments and homes, more property owners are now turning to sites like Airbnb to rent out their properties in return for some extra cash. Property owners should be cautious before renting out properties on such sites as this type of short-term letting may put you in breach of covenants which restrict the use of your premises.
These restrictive covenants are often found in long term leases, particularly those which relate to apartments. New build properties and houses situated on a housing estate are also frequently subject to such covenants as they allow the developer to retain a degree of control over the use and enjoyment of the property for the benefit of the adjoining occupiers. A covenant which is commonly used intends to restrict the use of the property to a private residential dwelling.
In the recent case of Nemcova v Fairfield Rents Ltd (2016), the Upper Tribunal found that the granting of short-term Airbnb style lettings amounted to breach of the lease covenant not to use the flat other than as a private residence. The tribunal considered that not all lettings would be breaching such covenants but that ‘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 a week’. Therefore, it appears likely that the majority of short-term Airbnb style lettings will be found to be in breach of covenants that limit the property’s use to a private residence.
In the later case of Bermondsey Exchange Freeholders Ltd v Ninos Koumetto (2018) the court found that letting premises out on this short-term basis would breach a residential user covenant as this type of letting amounted to use as commercial letting.
Other covenants to look out for are those which restrict or prohibit sub-lettings or sharing or parting with possession of any part of the property. In the Bermondsey case the tenant rented out his flat via Airbnb and other similar platforms. The court found that the tenant was in breach of the alienation covenant in the lease which restricted dealings with the property and required the landlord’s consent to any sub-lease.
Things to look out for
Before granting any short-term lettings, you should carefully review your property deeds, mortgage conditions, and lease (if leasehold) to identify any restrictions which may prevent this use of the premises. You should look out for the following covenants in particular:
If you are found to be in breach of a lease covenant then this may lead to forfeiture of the lease and repossession of the property by the landlord. Otherwise, the landlord may pursue an injunction to prevent the use of the property for short-term style lettings. It is likely that you will be in breach of your mortgage conditions, even if you have a buy-to- let mortgage, if such lettings do not satisfy the mortgage conditions. It is also useful to note that these types of lettings may also put you in breach of planning law.
If you are looking to enter into short-term letting agreements and require legal advice, please get in touch with our team of experts at firstname.lastname@example.org, fill out our online enquiry form or call us on 01484 821 500.