London,
24
October
2016
|
12:32
Europe/Amsterdam

Could listing your property on Airbnb be a breach of your lease?

England's highest specialist property court, the Upper Tribunal, ruled in September that where the terms of a lease stipulate that a property must only be used as a "private residence" then the lessee is not permitted to let the whole of the property for very short periods, particularly where the lessee does not occupy the property themselves.

The circumstances of this particular case, Nemcova v Fairfield Ltd, were that Ms. Nemcova was a long lessee of a residential flat in Enfield, North London and she let her flat on Airbnb as well as other websites, such as TripAdvisor and her own personal website. Other lessees in the block requested that the landlord take action against Ms. Nemcova as they were concerned about strangers entering the block and staying in her flat for short periods. Ms. Nemcova's response was that as she was still paying for the flat's outgoings and would stay at the flat herself for two or three days a week, this was sufficient to satisfy the "private residence" covenant contained in her lease.

The Upper Tribunal thought otherwise and ruled that her short lets were a breach of the terms of the lease as Ms. Nemcova did not evidence that she stayed there beyond a few nights of the week or at weekends. The noise and nuisance covenants contained in the lease were also an issue for the Upper Tribunal to take into account.

The main issues for lessees to consider as a result of this ruling are:

  1. A covenant to use property as a "private residence" and not for the carrying on of a business or trade is breached by short term lets, even though those lets may be residential in nature.
  2. Some residential leases prohibit subletting the whole or part of a property without the prior written consent of the landlord. Those leases which permit subletting, such as tenancies, are unlikely to breach the "private residence" user covenant where the tenancy has been granted for private residential use for a minimum period of 6 months; however, short term lets of a few days or weeks risk court proceedings being brought against a lessee for forfeiture of the lease.
  3. Short term lets can also affect lenders and breach mortgage conditions. Such a breach by a property owner could be an event of default, requiring repayment of the entire mortgage.

The Upper Tribunal highlighted that each case would be considered on its own facts. Any lessee looking to make an income from short term lets of their property should review the terms of their lease and obtain specialist advice and/or the consent of their landlord where necessary.

If you would like more information or advice on the recent Airbnb court ruling, please contact Graham Kaye or any member of the Residential Real Estate team.

Contact
photo:Graham  Kaye
Graham Kaye
Partner: Head of Residential Real Estate
photo:Vasoula Televantos
Vasoula Televantos
Associate
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