The Govt seems very keen on Airbnb-style short term letting. First, the planning change in London to permit short term letting for up to 90 days in any year, then Osborne’s £1000 tax break for Airbnb style landlords in the March 2016 budget.
Of course, the up to 90 days a year (in London) rule seems to be subject to huge and widespread breaches, with some 4680 ‘year round’ listings in London in September 2015. This is a headache for the council planning enforcement teams.
But, the distant fear of council enforcement aside, and as any landlord and tenant lawyer would expect, things are not so simple for the Airbnb letters. Letting property, even on a short term basis rarely is…
Exhibit 1. Mortgage lenders are not keen.
It appears that the terms of most residential mortgages would be broken by allowing a short term let of the entire property. And many mortgage lenders would require consent (and a fee) even for short term renting out of a room.
While lenders aren’t (yet) exactly poring over the Airbnb listings to establish breaches, it could mean an unexpected demand to repay the whole mortgage immediately.
Exhibit 2. Breach of lease/tenancy.
A First Tier Tribunal (Property Chamber) decision – LON/o0AY/LBC/2015/0021 on an application to determine a breach of lease.
The rather splendidly named St John Guy Rogers was the lessee of a 3 bedroomed penthouse flat in London SW2, the ever so slightly less splendid Streatham Hill. The applicant freeholder’s case was that:
the Respondent is subletting rooms within the Property by advertising on various websites including Air BNB, Prime Location and Holiday Lettings, contrary to paragraph 25.1 of the Eighth Schedule Part I to the Lease. Those who are renting those rooms are using the Property for noisy and at time riotous parties which involves the playing of loud music after the hours of iipm (contrary to paragraph 8 of the Eighth Schedule Part II to the Lease) and is causing noise nuisance and annoyance to other occupiers in the Building (contrary to paragraph 6 of the Eighth Schedule Part II to the Lease). By the letting of rooms and separately to whether this amounts to a breach of paragraph 25.1, the Applicant asserts that letting rooms in this way amounts to use of the Property “otherwise than as a private residence for occupation by a single household” and that the Respondent is carrying out a trade or business from the Property. The Applicant also asserts that the Respondent is letting out the Property to other commercial agents for photo shoots which lends support to him using the Property as a trade or business. This constitutes a breach of paragraph 1 of the Eighth Schedule Part I to the Lease.
There was no dispute on facts in witness evidence.
Mr Guy Rogers asserted that he hadn’t sublet because he hadn’t parted with possession of the whole and the rest really wasn’t his fault because things happened outside of his control (I paraphrase slightly). Mr Guy Rogers also had applied for an adjournment on the basis that his solicitors had told him that 6 weeks was not long enough to find counsel for the hearing, so he was in person, but this was not accepted by the Tribunal (and indeed, it would be very hard not to get counsel at 6 weeks notice.)
Paragraph 25.1 of the Eighth Schedule Part I to the Lease prohibited subletting the whole or part of the Property without prior written consent of the Lessor.
The tribunal found that there was not a breach of this because, while Mr Guy Rogers had let out rooms on a short term basis:
on the facts here what the Respondent is doing is more akin to running a guest house from the Property. He is letting rooms for a day or possibly a week but on a serviced basis (eg providing bedding). Although he did say that one of the rooms was capable of being locked, and although one of the advertisements does refer to the Property being “generally” offered hosted, the Tribunal had no reason not to accept the Respondent’s evidence that he is present during the lets and indeed the reviews read as from “guests” and not from persons who consider themselves to be obtaining any right to possession of any part of the Property exclusively.
But while there was no parting with possession on whole or in part, Mr Guy Rogers fell foul of paragraph 1 of the Eighth Schedule Part II to the Lease by allowing the Property to be used “otherwise than as a private residence for occupation by a single household” and for carrying out a trade, business or profession from the Property.
And, to remove any doubt, the Tribunal added that:
the Respondent is in breach of paragraphs 6 and 8 of the Eighth Schedule Part II to the Lease by allowing or suffering the Property to be used for “any act or thing which shall or may become a nuisance damage annoyance or inconvenience to the Lessor or to the lessors or occupiers” of other properties in the building in which the Property is situated.
Breach of lease found (apparently for the second time, with a previous finding on similar grounds in 2013).
Comment
I know of at least two other cases, both in the county court, involving Airbnb and breaches of lease/tenancy.
One in which a possession claim involved a finding that the Defendant was in breach of a clause in his assured shorthold tenancy (yes, an AST) restricting use of the property to being a private residence for the tenant and his immediate family. Remarkably, the tenant tried to argue that the additional people in the property made it an HMO such that the s.21 notice was invalidated. This was rightly slapped down as a) it was not a mandatorily licensable HMO in any event and b) it was his breach of tenancy that he was seeking to rely on.
Then there is another case I’ve heard of, ongoing, involving a leaseholder, with alleged breaches of a clause for use as a private residence.
I suspect that things are beginning to build up now, with freeholders, freehold management companies and landlords taking action on leaseholder’s and tenant’s Airbnb activities, particularly where these are causing a nuisance to other lessees or tenants.
It should, of course be noted that Airbnb’s terms and conditions state – for those listing their properties:
Accordingly, you represent and warrant that any Listing you post and the booking of, or a Guest’s stay at, an Accommodation in a Listing you post (i) will not breach any agreements you have entered into with any third parties, such as homeowners association, condominium, lease or rental agreements, and (ii) will (a) be in compliance with all applicable laws (such as zoning laws and laws governing rentals of residential and other properties), Tax requirements, Intellectual Property laws, and rules and regulations that may apply to any Accommodation included in a Listing you post (including having all required permits, licenses and registrations), and (b) not conflict with the rights of third parties.
Perhaps people should check their leases and tenancy conditions rather more closely. Because forfeiture or possession proceedings may be the result.
I would be very interested to hear of other cases from readers on this issue, particularly concluded ones.