Nemcova v Fairfield Rents Ltd [2016] UKUT 303 (LC)
We’ve seen a First Tier Tribunal case on breach of lease by use of the property for short term lets through Airbnb. Here the Upper Tribunal weighs in on the significance of lease covenants for short term letting use.
The question was an ostensibly simple one:
A long lease contains a covenant 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. If the leaseholder advertises on the internet the availability of the premises (a flat) for short term lettings and grants a series of such lettings, do the leaseholder’s actions breach the covenant?
It was not in contention that the lessee let out the flat for a night or two a time, mainly to business travellers, for about 90 days a year.
At the FTT, the lessee had argued that
It was necessary to construe the lease as a whole. He noted the lack of material restrictions on underletting or granting short term tenancies or licences, the lack of a positive requirement that the Lessee reside in the flat herself or occupy it as her principal home, and the lack of any covenant prohibiting business or commercial use or use of the flat for holidays. It followed, he contended, that provided that the flat was being used as a private residence by someone, the circumstances of their occupation were immaterial.
and
that the only meaning that can be ascribed to the words ‘private residence’ is whether the flat can physically be described as a private residence, namely whether it retains the physical characteristics of a private residence such as a kitchen, bathroom and living area, and he cited in support of this proposition the decision of the Court of Appeal in Jarvis Homes Ltd v Marshall [2004] 3 EGLR 81
The freeholder had relied upon Caradon District Council v Paton [2000] 3 EGLR 57; Tendler v Sproule [1947] 1 All ER 193; and Falgor Commercial SA v Alsabahia Inc [1986] 1 EGLR 41 in its argument that the use was not as a private residence.
The FTT had adopted Caradon in finding that use as a private dwelling house required the flat to be occupied as a home and that ‘private dwelling house’ and ‘private residence’ were interchangeable terms.
The Upper Tribunal distinguished Falgor and Tendler on the facts and contexts, and was reluctant to find that it was necessary to import the idea of use as a home for ‘private residence’ as per Caradon. The UT then went on to hold:
The clause does not state that the premises are to be used as the private residence of the lessee or the occupier, but as ‘a private residence’. The use of the indefinite article (‘a’) is significant. A person may have more than one residence as any one time- a permanent residence that he or she calls home, as well as other temporary residences which are used while he or she is away from home on business or on holiday. It is immaterial that the occupier may have another, more permanent residence elsewhere as there is no requirement that the occupier is using the property as his or her only (or main, or principal) residence. However, it is necessary, in my judgment, that there is a connection between the occupier and the residence such that the occupier would think of it as his or her residence albeit not without limit of time. In short, for the covenant to be observed, the occupier for the time being must be using it as his or her private residence.
And then, on whether short term lets could meet that description if use as a residence:
I have reached the view, consistent with the decision of the Ft T, that the duration of the occupier’s occupation is material. It does seem to me 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 in the week. In my judgment, I do not consider that where a person occupies for a matter of days and then leaves it can be said that during the period of occupation he or she is using the property as his or her private residence. The problem in such circumstances is that the occupation is transient, so transient that the occupier would not consider the property he or she is staying in as being his or her private residence even for the time being.
Having considered the context of the grant of the lease, and the nature of the intended relationship between lessor and lessee taking account of the obligations entered into, I am of the view that in granting very short term lettings (days and weeks rather than months) as the appellant has done necessarily breaches the covenant under consideration.
Appeal dismissed and finding of breach of lease upheld.
Comment
Unless the Court of Appeal deal with this issue at some stage, this is clear and binding authority that a lease covenant to only use a property as ‘a private residence’ is breached by short term, holiday, or Airbnb style letting. The clause would not prohibit longer sub-letting, for a tenancy say (though other lease clauses on sub-letting may be present).
This is a common, though not universal lease clause. Anyone doing Airbnb lettings in a leasehold flat should immediately check their lease covenants, because if the freeholder/head lessor decides to take action for a finding of breach of lease on that clause, this is a clear precedent that such a use would certainly be a breach.