Can I rent my flat on Airbnb?
If you have a bit of extra space or a second property, then you might have considered renting it out through Airbnb. It’s a popular platform to let rooms or whole apartments to those looking for a short term stay. Homeowners can list their property on the website with photos, house rules and of course - a price. It might seem like a low hassle way of renting your extra space, but if you own a leasehold flat then you could be at risk of breaching your lease.
Can your lease only be used as a private residence?
Iveta Nemcova owned a leasehold flat in Enfield which she frequently let through Airbnb and other rental sites. Neighbours in the block complained to the freehold owner, Fairfield Rents Limited, who then issued court proceedings.
The lease contained several covenants which are commonly found in a residential lease, namely:
“(1) Not to use the Demised Premises or permit them to be used for any illegal or immoral purpose or for any purpose whatsoever other than as a private residence.
(2) Not to do or permit to be done any act or thing in or upon the Demised Premises or any part of the Property which may be or grow to be a damage nuisance or annoyance to the Lessor or the Company or any of the occupiers of other flats in the Property or to the occupiers of any neighbouring or adjoining property.”
You might have noticed that the first covenant states that the property was only to be used as a private residence. Ms Nemcova argued that, as she paid bills and rents relating to the property, it was still her main residence even though she let it out for short periods. Unfortunately for Ms Nemcova, the Court decided that she was indeed breaching the terms of her lease by engaging in these short term rentals. The Judge ruled that “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.”
So, what exactly does ‘a degree of permanence’ mean? Ms Nemcova usually rented the flat for a few days a week, either to holidaymakers or those visiting the city for business. The duration of these lets was deemed to be relevant, and the Judge felt that this type of renting was more akin to booking a hotel room rather than guests taking on the flat as their own short term private residence. The Court stressed that each individual case would depend on the duration of the lets as well as the wording in the residential leases. Nevertheless, Nemcova v Fairfield Rents Limited has subsequently been dubbed ‘the Airbnb ruling’.
What other clauses might affect you?
“A private residence” is not the only wording that could ground your Airbnb dreams, and other common clauses to look for include:
- A clause which prohibits you from causing or permitting a nuisance. If your lease states that you’re not to play loud music or cause a disturbance, then that clause extends to any guests you allow in the property as well. You mustn’t permit any visitors who cause a nuisance and as the leaseholder, you’ll be held responsible if the freeholder brings a claim against you.
- A clause which restricts subletting of the whole or part of the property unless by way of an Assured Shorthold Tenancy agreement. You will want to be sure that the form of agreement your guests enter into does not fall foul of this provision. This wording effectively restricts the duration of lets to a minimum of six months, meaning short term guests could be a problem.
- A clause stating that the property must not be used for business or trade. Arguably, short term lets which generate an income could constitute a business and may be seen as change of use. If you do this without planning permission, you can face a hefty fine so check with your local authority before you start letting.
Disregarding any of the above clauses could not only upset your neighbours, but could also have serious consequences if you end up in breach of your lease terms. As Ms Nemcova found, the freeholder may issue legal proceedings against you and ultimately they could decide to seek forfeiture of your lease. The legal costs can be substantial if litigation ensues and you don’t want to have to pay out because you weren’t aware of your obligations. Not only that, but short term lets could also put you in breach of mortgage conditions. If you haven’t received consent from your lender where you need to, it could lead to repossession proceedings or a demand for repayment in full.
So before you advertise your property for an Airbnb style let, you should check your lease and its terms carefully. Review any restrictions on use and what consent you might need to obtain, and be sure to seek specialist advice before you start letting.