Snarecroft Ltd v Quantum Securities Ltd (2018) EWHC 2071 (Ch)
This is a High Court decision from February, but it has just appeared on Bailii. The issue was the construction of a lease term which provided that the tenant must
“Following the obtaining of planning consent for residential use, not to use the premises or any part thereof other than for residential purposes.”
The tenant was proposing to alter and use what had been two flats as a 19 bedroom hotel, (the second flat having been constructed after the grant of planning permission envisaged in the lease clause).
The judgment amounts to a clear review of case law on restrictions of use to “single private residence”, “private dwelling house”; “private residence” and lastly “residential”.
Mayflower Cambridge Ltd v Secretary of State for the Environment (1975) 30 P & CR 28 was a planning case, concerning hotel use. The relevant element of the decision, concerning transience of use, stated
I have no doubt that this is well understood and is acceptable as an ordinary use of English, namely that the real difference between use as bedsitting rooms and use for the purposes of a hotel turns on the stability or instability of the population in the premises and the extent to which they are making the individual flatlets their homes. The essence of a hotel is that it takes transient passengers. Of course, there may be an individual here and there who stays for a long time if it suits him, and there a buildings which are wrongly described as hotels or residential hotels, but the basic feature of a hotel as the word is used in the English language is that it contains a transient population because it is there to serve people travelling who require short stays only. By contrast, the bedsitting room and the way in which the phrase is used in English is somebody’s home. It is where somebody lives. It is where somebody remains for a substantial time.
The Court of Appeal in Falgor Commercial SA v Alsabahia Inc (1985) 18 HLR 123, (1986) 1 EGLR 41was concerned with user clause requiring use as a ‘single private residence in one occupation only’.
The use at issue was ‘ granting occupational licences to visitors to reside in the flats for short stays in return for payments, the flats being equipped and furnished by the lessees and cleaned by their employees’ (so, one might say, very similar to whole property airbnb/short let use. The Court of Appeal found:
“In my view, the defendant’s user is not residence user at all. It is the business of providing service accommodation, and it seems to me there is no question of the defendant using it as a residence, much less as a private residence. It is true that this was a lease granted to the company in expensive premises and a company (unlike an individual) may have limited use for such premises unless it can exploit it for value. Licencing in the manner which has been adopted in this case is such a method of exploitation, but in my view the judge’s decision does not mean that the property is frozen in the defendant’s hands. The defendant can exploit it simply by subletting it, and it seems to me that it is reasonable enough to suppose that a landlord would in a lease of this sort stipulate for exploitation by subletting rather than by licencing. The occupancies in the case of subletting are likely to be longer periods with less comings and goings. The subtenants will probably be more carefully chosen than would be the case with licensees, and the creating of subleases requires the consent of the landlord.”
This is, as the present court notes, at quite a high level of generality – dealing primarily with residence, rather than the specific qualifiers of ‘single private’.
Also in the Court of Appeal, Caradon District Council v Paton and Bussell (2001) 33 HLR 34 concerned a clause in a Right to Buy lease, not to use the property “for any purpose other than that of a private dwelling house.”
The property was used for short let holiday stays. The Court of Appeal found a breach of covenant:
I consider that the answer to the question posed by this case is dependent on whether or not one can properly describe the occupation of those who are the tenants for the purposes of their holiday as being an occupation for the purposes of the use of the dwelling house as their home.
Both in the ordinary use of the word and in its context it seems to me that a person who is in a holiday property for a week or two would not describe that as his or her home. It seems to me that what is required in order to amount to use of a property as a home is a degree of permanence, together with the intention that that should be a home, albeit for a relatively short period, but not for the purposes of a holiday. It follows from that analysis that the evidence before the judge and before this court really permits of only one conclusion, namely that that is that the occupation of the holidaymakers of these two properties was not for the purposes of use as a private dwelling house within the meaning of the phrase ‘in these covenants’.”
And also
“It appears to me that the concept of using a property as a private dwelling-house involves the use of it, at least in some way, as a home. I can understand that a person with two houses, who spends his holidays in one of them, may fairly be regarded as spending them in his second home. However, we are not concerned with that situation here. A person renting a holiday house for, say, one or two weeks is not using it, in any sense, as his home. On the contrary, he leaves his home in order to have his holidays somewhere else.”
So while this was on ‘dwelling house’ rather than ‘residence’, there is again the issue of occupation as a home as against transient occupation.
And then, there is Nemcova v Fairfield Rents Ltd (2016) UKUT 303 (LC) (our report). The lease clause forbade use other than ‘as a private residence’ and there had been airbnb/short let use. Noting the use of the indefinite article (‘a’), the Upper Tribunal held
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
“The main thrust of the landlord’s submissions concerns the duration of the lettings being advertised and granted by the appellant. I must consider whether the duration of the letting affects the answer to the question whether the occupier is using the premises as a private residence. As I have emphasised, it is the use being made for the time being, by the occupier for the time being, that is material. If the occupier is in the property for a matter of days (rather than weeks or months or years), does that transform the nature of the use being made of the premises such that the occupier would not then be using them as a private 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.”
So, again, the emphasis on transient use against more permanent use.
Turning to the specific ‘residential’ use clause in this lease:
It is clear on the authorities that a person may have more than one residence and therefore use of a particular property for staying in even for a short time, say, for the purposes of a holiday, can still be a residential purpose. But, even if a person has several residences, each one of them has some stability. Even if one of your several residences is only a bedsit on a weekly licence, you return to it; you keep your own clothes, your own furniture, your own other effects there. But that is not true of a transient hotel where you arrive with a suitcase and you depart the next day. Even if you come back frequently to the same hotel, you do not necessarily occupy the same room, you bring back your clothes and effects, and others may have occupied that room during your absence. So, in the context of this lease, it seems to me that what is plainly contemplated is two flats, possibly subdivided into smaller units such as bedsits, but all of them as residences and not as overnight accommodation. There is a non-transient, longer term idea at work here. I do not say that the phrase “residential purposes” in the abstract could never apply to a hotel, but I do say that in the context of this lease, “residential purposes” does not include conversion into a hotel. Here, in my judgment, “residential purposes” as a phrase is being used in opposition to “business purposes”. So flats, even, as I say, perhaps divided into bedsitting rooms, which were let on weekly or monthly tenancies or licences, would be used for residential purposes, whereas a hotel for short stay travellers would not. The planning permission which has been granted in the present case for use as a hotel is plainly restricted to short stay travellers, being limited to a maximum of 90 days and not to longer term occupiers. This in my view is use for a business purpose.
It is not possible also to avoid the fact that a hotel is very much a place of work for its staff. Even if the guests sleep in bedrooms, there are offices, there are kitchens, there are dining rooms, luggage stores and so on where people are working. It is their place of work. Even if a hotel could be said to be used in part for residential purposes where the guests are sleeping, it is also being used at least in part as a place of business. So in my judgment it would infringe the covenant such as we have here, which is not to use for other than residential purposes. In my judgment, the approach taken by Fox LJ in the Falgor case, where he says, at page 42L,
“In my view, the defendant’s user is not residence user at all. It is the business of providing service accommodation, and it seems to me there is no question of the defendant using it as a residence”,
is very much the principle which applies in the context of this lease. Accordingly, I hold that the purpose of carrying on a boutique hotel pursuant to the planning permission granted in that behalf would infringe (the user clause)
Breach of lease found.
Comment
While this judgment will clearly be of wider application in ‘short let’ breach of lease cases, and is in line with the precedents cited, it seems to me that there is something of a point of tension arising.
That is over the nature of transient use. Some judgments, as in Nemcova, discuss use for ‘a matter of days, rather than weeks or months’. Other judgments, like Caradon District Council v Paton and Bussell, cite the nature of the use rather than a period per se:
It seems to me that what is required in order to amount to use of a property as a home is a degree of permanence, together with the intention that that should be a home, albeit for a relatively short period, but not for the purposes of a holiday.
As the short let wars get hotter, I think this is likely to be a central issue. Is ‘residence’ primarily defined by a period of time (‘weeks or months, rather than days’), or by the nature of the occupation (staying in a hotel for a month would not count as a residence). I know that some ‘short let’ setups are determinedly seeking a definition of a period of time that would make use residential.
But, as the example of the ‘second home’ makes clear, I don’t think they are going to get one. Is someone spending a few weekends a year in their ‘second home’ not using it as a residence? The judgments here would seem to say that they would be.
I rather suspect that aside from duration, other factors will come to the fore, as indicated in some of these judgments. Is the accommodation serviced? (Eg, cleaning and provision of towels, bed linen etc. Not necessarily daily, weekly would count). Does the accommodation include provision of the basics, say for example, cooking utensils, or not? Is the accommodation somewhere where the occupier keeps personal effects and furniture (pace the present judgment).
But I have no doubt that this will not be the end of the ‘airbnb use’ wars. There are too many leasehold properties bought solely for that lucrative use for these things not to continue to be fought out.