It is becoming increasingly common to use websites such as Airbnb to advertise your home to let out as an alternative to renting a hotel. However, a recent case highlights the risk of jumping on the bandwagon to make a quick buck where you own a leasehold rather than a freehold interest in your home:
Ms Nemcova owned a long lease of a residential flat which was a part of a larger block. The 99 year lease was fairly standard and contained various user covenants including a covenant not to use the flat “for any purpose whatsoever other than as a private residence”. Ms Nemcova advertised the flat on the internet for short term lettings. She used websites such as Airbnb and Holidaylettings, she also set up her own website to advertise the flat.
She went on to grant a series of short term lettings. The individual lettings were for a matter of days or weeks and almost exclusively to people staying in London for business purposes rather than on holiday. Several of her neighbours took issue with her use of the flat in this way and complained to the landlord who then issued an application under s168(4) of the Commonhold and Leasehold Reform Act 2002 for a determination of breach of the private residence covenant. The lease did not contain a prohibition on subletting and so Ms Nemcova argued that as long as the flat retained its characteristics as a private residence then there was no difference between the granting of a short term let and an assured shorthold tenancy agreement.
The First Tier Tribunal concluded that a breach of the covenant not to use the flat “for any purpose whatsoever other than as a private residence” had arisen. However, due to a lack of authority in relation to the meaning of ‘private residence’ and the popularity of websites such as Airbnb, she was given permission to appeal to the Upper Tribunal.
The matter was appealed to the Upper Tribunal and the decision in favour of the Landlord was upheld. It concluded that the covenant only required Ms Nemcova to use the flat as ‘a’ private residence and therefore it did not have to be her only or main home. However, it felt that when the flat was let out for periods of a few days that it could not be said that the occupier was using the flat as their ‘private residence’.
Key points arising from the decision:
- A landlord may be able to forfeit your lease if you decide to let it out via websites such as Airbnb, if the letting constitutes a breach of covenant.
- Each lease is different and whether or not a breach of covenant has occurred will be highly fact specific. If you are thinking of granting short term lets of your property then review your lease and speak to your landlord or seek legal advice.
- The key covenant in this lease was that the flat was not to be used “for any purpose whatsoever other than as a private residence”. The restrictions in this particular lease could have been greater. For example, it did not require Ms Nemcova herself to reside in the flat or to reside in it as her only or principal home. Some leases may go even further and expressly prohibit short term lettings and/or holiday lettings: it is important therefore to check your lease and see what restrictions there are in it before offering it for short term lettings.
- Short term lets will not constitute use as a private residence. The duration of occupation is material and for a property to be used as a private residence there must be a degree of permanence going beyond being there for a weekend or a few nights in the week.
It is unlikely that this is the final word on what is a relatively new issue. Whilst the case is of concern to leaseholders, both leaseholders and freeholders should also be aware that your mortgage conditions may prevent you from granting short term lets as well.