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Simon Painter Simon Painter Partner
09 August 2017

The ‘Airbnb ruling’ – Sub letting a residential property

By Emma Dunkley

The highlighted case of Nemcova v Fairfield Rents Ltd [2016] UKUT 303 (LC) was decided by the Upper Tribunal in September 2016. It has become known as the ‘Airbnb ruling’.

Background

Ms Nemcova was the long leasehold owner of a flat in London. She conceded that she had let her flat on short term lets via the internet and had done so on approximately seven separate occasions over a year. Ms Nemcova stayed in the flat three or four days a week and paid the council tax and utility bills. The landlord took the view that by letting the flat for short term rentals on Airbnb, Ms Nemcova had breached the user covenant in her lease.

The Terms Of The Lease

The terms of Ms Nemcova’s lease were that she was permitted to assign, sub let or part with the whole of the flat, except within the last seven years of the term; there were no restrictions as to short term lettings; there was no express prohibition that the flat could not be used as a holiday home and nor did it expressly state that Ms Nemcova had to reside or even occupy the flat as her principal home.

However, the lease contained the usual user covenant:

‘Not to use the Demised Premises or permit them to be used for any illegal or immoral purpose whatsoever other than as a private residence.’

Decision

The Upper Tribunal said that the question to be asked is not whether the property is being used as the occupier’s home, but whether it is being used as a private residence. In the Tribunal’s view:

‘…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’.

The Upper Tribunal determined that by letting out the flat on Airbnb, Ms Nemcova had breached the user covenant in her lease.

Whilst it was made clear that each case will turn on its facts, lessees should heed the warning in Nemcova.

Practical Considerations – Landlords

  • A residential property in Greater London can be let on short-term lets without obtaining planning permission for change of use, as long as the short term lettings do not exceed 90 days per calendar year. As a result of the relaxation in the planning laws, a landlord may wish to consider inserting wording into the lease to expressly prevent a lessee from advertising and sub letting the property on short term rental sites such as Airbnb
  • Be aware that a number of lessees are using short term rental sites to generate income. The landlord of a block of flats may not want different people coming and going all the time and may be concerned about the other tenants’ quiet enjoyment of their flats. Is the security of the building being compromised?
  • If a lessee is renting its property on short term lets, check the terms of your buildings insurance. Could this invalidate the buildings insurance?

Practical Considerations – Lessees

  • By advertising and letting your property on short term rental sites, not only might you be in breach of the terms of your lease, but also the terms of your mortgage
  • Advertising and letting your property on short term rental sites could invalidate your buildings and/or contents insurance. By letting your property you may be deemed to be running a business. General household insurances tend not to cover business use
  • If the occupiers refuse to vacate, you will need to obtain a court order to regain possession of the property
  • Recently there has been a flurry of articles in the press regarding short term lettings including a flat that was turned into a brothel, an Airbnb rental used for an all night party, complete with 200 people and a sound system for the DJs and the occupiers who used a fake profile and stole everything of value!
  • A long lease has the usual covenants that the property must not be used for illegal or immoral purposes and that you must not cause a nuisance. If you breach either of these covenants, the landlord will have remedies against you

For more information contact Simon Painter.

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