Airbnb – Leaseholders Beware!

The overwhelming popularity of Airbnb is now resulting in a review of the case law relating to short term lets. Property litigation lawyer at Osbornes, Shilpa Mathuradas, examines the case of Nemcova v Fairfield Rents Ltd [2016]. In this case The Upper Tribunal considered whether a covenant in a residential lease prohibiting use other than private residence had been breached.

In this case the tenant owned a long lease in a purpose built block of flats. The tenant’s lease contained a covenant “Not to use the Demised Premises or permit them to be used for any legal or immoral purpose whatsoever other than as a private residence.”.

The tenant had advertised the availability of her flat for short term lettings on the internet and had granted a series of such lettings. The freeholder sought a determination from the Tribunal that the tenant had breached the covenants in the lease.

The tenant argued and gave evidence as follows:

• She paid the council tax and utility bills for the building;
• The flat was her main residence
• She let the flat for only 90 days a year and on about seven separate occasions in the past twelve months. The lettings were almost always to business visitors.
• She currently stayed at the flat three or four days a week staying with her boyfriend on the nights she was away.

The First Tier Tribunal found in the landlord’s favour holding that the tenant had breached the covenant in her lease. They held that as the people occupying the flat on a short tem letting would not be occupying the flat as their home, it followed that the tenant was using the flat for a purpose other than use as a private residence.

The tenant appealed to the Upper Tribunal who found in the landlord’s favour and dismissed the tenant’s appeal. The Upper Tribunal stated that it was necessary for there to be a connection between the occupier and the residence such that the occupier would think of it as their residence. The current occupier must use the flat as their private residence for the covenant to be observed.

The Upper Tribunal further stated that what was material was the duration of the occupier’s occupation. There had to be a degree of permanence for a property to be used as the occupier’s private residence, and this would require the occupier residing in the property for more than a weekend or a few nights in the week. Where a person occupies a property for a number of days and then leaves, it could not be said that the occupier was using the property as their private residence during the period of occupation.

In summary, the Upper Tribunal said that each case had to be assessed on their particular facts and the construction of the particular covenant. The Tribunal said that it was not possible to give a definitive answer to the question whether a tenant with a long residential lease that contained a covenant not to use their demised premises other than as a private residence would breach their lease if they advertised the availability of their flat on the internet for short term lettings and granted a series of such lettings.

This case serves as a useful reminder of the importance for leaseholders to seek specialist legal advice before offering their property on a short-term let. The consequences could be very significant. Leaseholders should also be mindful that such short term lets may in fact breach the conditions of any mortgage agreement for a mortgage secured against their property.

To speak with Shilpa about a property issue you are facing get in touch by calling us on 020 7485 8811 or fill in an online form.