Expert Opinion: Airbnb and Leasehold Flats

Introduction

Just in case there are some readers who have not comes across Airbnb before it is described (on its website) as ‘a trusted community marketplace for people to list, discover, and book unique accommodation around the world — online or from a mobile phone or tablet. Whether a flat for a night, a castle for a week, or a villa for a month, Airbnb connects people to unique travel experiences, at any price point, in more than 65,000 cities and 191 countries. And with world-class customer service and a growing community of users, Airbnb is the easiest way for people to monetise their extra space and showcase it to an audience of millions.’

So a way for people to rent out their homes to others on short-term lets. Again, according to the website, there are now more than 3 million listings. But the writer was recently asked how such a letting might be affected by the kind of covenants one commonly finds imposed in leasehold flats. Obviously, it will depend upon the particular covenant in the particular flat, but these issues have now been litigated.

The Case Law

There have been at least two reported cases dealing with this issue:  Flat A,  20 Nottingham Place, Westminster [2016] EWLVT LON_LV_FFT_00BK_0020 and Nemcova v Fairfield Rents Ltd: [2016] UKUT 303. And both cases show that Airbnb lettings run the risk of falling foul of various leasehold covenants – and breach of covenant can lead to the risk of forfeiture of the lease.

In Nemcova, the covenant in question was one to use the flat ‘only as a ‘private residence’. HH Judge Stuart Bridge held ‘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 problem in such circumstances is that 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… I am of the view that in granting very short term lettings (days and weeks rather than months) as the appellant has done necessarily breaches the covenant under consideration.

In 20 Nottingham Place, as well as breaching a covenant not to sublet without consent, it was also that there were breaches of covenants as to not causing nuisance and annoyance, not using it in a way ‘which would depreciate the character and reputation of the demised premises and the property’ and not doing anything ‘which may render any policy or policies of insurance effected in respect of the property by the Lessors void or voidable.’ The insurers had stated that they were not prepared to continue cover on the buildings insurance policy for 20 Nottingham Place because “they do not allow holiday homes under a residential property owner policy.” Presumably, there will be a bigger risk with numerous non-flat owners having access to the building.

Comment

So there we are. Unless the Court of Appeal deal with this issue at some stage, this is clear and binding authority that various lease covenants can be broken by short term, holiday, or Airbnb style lettings.

And of course, there are other issues as well. What about planning? What is the authorised use of the premises for planning purposes? Does it include short term holiday lets? If not there could be two consequences: planning enforcement action by the local authority – and breach of yet another common lease covenant – not to do anything which contravenes any of the statutes etc relating to planning control and development.

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