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10 May 2017

Airbnb - Leaseholders think twice!

Thinking of using this online portal to rent your apartment to visitors on short term lets? Think twice!

Advertising a property via the Airbnb website seems attractive because it can offer a property owner a source of regular income and/or help to repay a mortgage. Where the property is an apartment, however, it will most likely be held on a long residential lease and renting your property via Airbnb may result in a breach of your lease terms.

Does your lease state that the property can only be used as a private residence?

In Nemcova v Fairfield [2016] a Slovakian designer, Iveta Nemcova, owned a leasehold property in Enfield, which was advertised via Airbnb as well as other rental websites as being available for short term lets. Her neighbours subsequently complained to the landlord (the freehold owner of the block) that such a short term let did not constitute using the property as a private residence.

The Court decided there had been a breach of this lease term where Ms Nemcova allowed guests to occupy her flat on short term lets, although, Ms Nemcova gave evidence that she let the flat out for about 90 days a year and had let it out on about seven separate occasions in the previous year, the court seems to suggest that the temporary nature of the visitors stay lacked sufficient permanency to be occupying the flat as a private residence. Judge Stuart Bridge ruled: “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 the week.”  The judge specifically said that the duration of the occupier’s occupation was material.  The implication is that a longer term letting would have been compliant although the question of where to draw the line will depend upon each individual case.  The judge stressed that each case will depend upon the wording used in the long residential lease. 

You should also check whether your lease contains any of the following terms:

  • Does your lease state the property must not be used for trade or business? It seems sensible to suggest that regular short term letting in exchange for money could fall within the definitions of trade or business.
  • Does your lease prohibit you from causing or permitting a nuisance? It is common for the leaseholder to be preventing from causing a nuisance but the lease will also usually state that the leaseholder must use their best endeavours to ensure that nobody else causes a nuisance.. For example, what if lawful visitors arrange a house party which carries on through the night, with blaring music which plays past the 11pm curfew.
  • Does your lease prohibit sub-letting of the property or any part of it unless by way of an assured short hold tenancy? You should take care to ensure that the form of agreement that Airbnb tenants have to enter into with the property owner (the leaseholder) does not fall foul of this provision.

The consequences of breaching a lease term can be serious. The landlord may instigate legal proceedings which could ultimately result in the landlord seeking possession of the property! Not to forget the legal costs. Short term lets can breach mortgage conditions which might result in the lender insisting that you repay the entire mortgage.

So, before you go ahead and advertise your property on a rental website, review your lease terms closely. If you are purchasing a leasehold property for rental income, you may wish to carefully consider whether or not (if you were prevented from renting the property out through Airbnb) this would affect your decision to purchase the property in the first place.


 This article was written by Shazmin Hirjani. For more information please contact Shazmin on +44 (0)1483 252 637 or at shazmin.hirjani@crsblaw.com.

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