Are you ready to Airbnb?

A brief guide for those thinking of participating in this property market trend

2008 may have witnessed the birth of Airbnb, but as of 1st January 2017 Airbnb’s systems will limit the entire homes listings in Greater London to a 90 night day limit per calendar year.

Further, section 44 of the Deregulation Act 2015 allows homeowners in London to use their property as temporary short term lets without having to obtain planning permission for change of use, so long as the total amount of nights’ use as a temporary let does not exceed 90 nights and the person who provides the accommodation is the one who pays the Council Tax.   Other than that, planning permission is needed.

What should I do if I am a tenant myself?

Serviced apartments, Airbnb and short term lets often use apartments in residential blocks where the apartments are, perhaps, leased to companies (as company lets) or owned by investors on a long leasehold interest with a view to letting out for short terms. If you are a tenant yourself, you will probably be occupying the freehold property under a lease, perhaps a long leasehold or maybe not. In any event, be sure you understand your leasehold covenants.

The Airbnb Ruling – what is this?

The reported case of last year in Nemcova –v- Fairfield Rents Limited [2016] UKUT 303 LC is known as the Airbnb ruling.

Hardwicke Building’s Jamal Demachkie was counsel in the case.   This case came before the Upper Tribunal (UT) to consider and determine whether cumulative short term lettings, (to around 90 days in one year), amounted to a breach of covenant in the lease not to use the property for anything other than “a private residence”.

The ruling was that it was a breach. The UT considered the circumstances of the case in detail and weighed up various factors, including the wording of the covenant and what would have been intended by the landlord and tenant when the lease was first granted.

Ultimately, the deciding factor was the length of the occupation by the Airbnb occupier. Could it really be said that an Airbnb guest was really using the property as their private residence, when they were only in occupation for a few days? The UT said ‘no’; what was required was a ‘degree of permanence’ so that the occupation was not ‘transient’. Such occupation will be rare in Airbnb short-term lettings.

The effect on the tenant of a finding of breach of covenant is severe. At worst, there is a risk of forfeiture by the Landlord.

Is there anything specific I need to do?

Yes, you will need to check your own Lease covenants when you are letting a property out through Airbnb. You need to check whether you can let it out at all.

In particular:

  1. Check your lease for a “private residence only” restriction and other covenants such as:

(a) not to sub- let the property or any part of it;

(b) not to cause or permit a nuisance to neighbours;

(c) not to run a trade of business from the property; and

(d) not to use it as a private dwelling/for a use other than Class C3.

2. If you are entering into a lease with the intention of letting out for this sort of short term let, negotiate adequate covenants that allow this.

3. If you are granting a lease to a service apartment operator or company let, where the headlease contains a covenant preventing short term lets, then be prepared for enforcement action.

4. Check with your mortgagee if there are restrictions or if you need mortgagee permission, for example, for anything other than an Assured Shorthand Tenancy (although many mortgage conditions also contain terms prohibiting of subletting).

If you would like more information or advice about Airbnb lettings may affect you as a landlord (or freeholder) then please contact Claire Lyon on [email protected] or 0207 408 8761.

Article written by Claire Lyon, Partner