Buying property for use as ‘Airbnb’ short-term holiday lets? Make sure you check the lease…..
22nd June 2017 by John Munro
The demand for short term lets is on the rise thanks to the success of sites such as Airbnb, whose services provide an online platform to allow individuals to rent out their homes, rooms or apartments to visitors. Previously, short term letting was not considered cost-effective by most Landlords but you can now often let your property at short notice and for only a few days at a time. As a result, we have seen an increase in homeowners wanting to purchase a second property for the sole purpose of short term holiday letting.
What exactly do we mean by ‘short term’?
Until recently, most short-term rentals have been measured in months or weeks rather than days. Airbnb and similar websites have now changed this outlook by making it more feasible to find tenants for much shorter periods of time and often at short notice.
Potential purchasers must be particularly careful when purchasing a flat or apartment for this purpose, as they must abide by the rules listed in their lease contract. Often leases will clearly state that any short term renting or holiday letting is prohibited, but what would happen if the lease does not state this or the wording is ambiguous?
This was discussed in the 2016 case of Nemcova v Fairfield Rents Ltd, where the owner of a long leased flat had advertised the availability of the flat for short term lettings on the internet and had granted a series of these lettings. The Freeholder applied to the Court, stating the owner had breached the user covenant that the flat could not be used ‘for any purpose whatsoever other than as a private residence’.
It was decided in this case that:
- It is necessary for there to be 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.
- The duration of the occupation was material and there must be a degree of permanence going beyond being there for a weekend or a few nights in the week.
- As the people who would be occupying the flat on a short term letting would not be occupying it as their home, it was decided that the flat was being used for a purpose other than use as a private residence.
It was therefore found that granting very short term lettings (i.e. days and weeks rather than months) does breach the covenant in that particular context. However, it was confirmed by the Court that the case was fact-specific and each case would depend on the construction of the particular covenant in its own factual context. It would be difficult for a precedent to apply universally, as each lease and each clause is different.
Where does this ruling leave us? How can we help?
Unfortunately, this is a very new and unknown area of law which will no doubt be tested again in the near future due to the rise in popularity of Airbnb type properties. Until this is the case, potential purchasers will have to be particularly cautious when purchasing a leasehold property for the purpose of short-term holiday letting. The lease must be carefully checked by your Solicitors before further costs of a purchase transaction are entailed.
This ruling will also be of concern to homeowners who are already doing short term or Airbnb lettings in a leasehold flat, as they may have similar legal clauses in their lease contract. It would be sensible to check your lease to determine whether you could be in breach of any of your lease clauses.
Please do contact us on 01202 557256 or firstname.lastname@example.org if you would like any help with reviewing and analysing the clauses in your lease or if you would like any further information in respect of short term lettings.