Over the last five years there has been a marked increase in the number of people using third party websites such as Airbnb and HomeAway to rent out their property. Many homeowners view this as a useful way of supplementing their income. For those looking to rent, the attraction is that such rentals offer a “home from home” environment and can often be cheaper than traditional hotel accommodation. However, it is becoming a more professional endeavour than the original home sharing model that was first introduced.
In London, the market for such rentals is ever increasing. According to one report, in the year to 1 July 2017 approximately 2 million guests stayed in properties in the capital that had been listed on Airbnb, which represented growth of approximately 49% on the previous year. However, while the use of these platforms continues to gather momentum, it has also brought into sharp focus the problems that can be associated with the short term sub-letting of residential leasehold property.
Here are four of the difficulties which might arise:
1. Breach of lease terms
Residential leases will usually contain a stipulation that the property (whether in whole or in part) must not be sub let, or at least not without first obtaining landlord’s consent. Most modern leases also contain restrictions on the use to which the property may be put and if such use is restricted to that of a single private dwelling only, letting the property on a short term basis may constitute a breach. Certainly, this was the outcome in the widely reported decision of the Upper Tribunal in Nemcova v Fairfield Rents Ltd (2016).
The higher turnover of occupants associated with short term lettings also increases the risk of other infractions. Excessive noise and other anti-social behaviour could give rise to a breach of the anti-nuisance provisions in the lease. The lease may also contain a covenant not to permit or carry out any acts which would invalidate the insurance for the property.
It is not just the wording of the lease that needs to be checked. Some freehold owners have introduced regulations which expressly restrict how their buildings may be used, which may include a restriction on short term lets through hosting websites.
2. Breach of planning requirements
Short-term rentals in Greater London are subject to a planning restriction, which makes the use of residential premises as temporary sleeping accommodation a “material change of use” for which planning permission is required if the property is let over a certain number of days per year. If a property is let as temporary sleeping accommodation for up to 90 days each year, this may not constitute a material change under planning rules. However, where a property is let on a temporary basis for a period which exceeds 90 days in any calendar year, such use may be classed as a development on the property for which specific planning permission is required. A failure to secure planning permission, where required, could lead to the service of an enforcement notice by the local authority and the possibility of a substantial fine.
3. Regulatory issues
Readers will be aware that there is a raft of stringent regulations which apply to landlords in the residential sector. What may not be appreciated is that many of these regulations apply also to the short term rental of a property to holiday guests. For example, it will be necessary to ensure compliance with fire regulations and up to date gas safety and energy performance tests shall need to be completed. The property must also be fitted with an adequate number of functioning carbon monoxide and smoke alarms.
4. Unauthorised sub-letting
Over the last few years, we have noticed an increasingly worrying trend of activity on host sites, not by the owners of the properties themselves but by tenants who have taken on the property under an AST of 12 months or similar, but who then proceed to sub-let a room or rooms to short term occupiers behind the property owner’s back in order to make a profit. Usually, the owner will only become aware of this after a problem with the rental, such as for example a complaint from residents in the building or when they unwittingly come across an advert for their property on a hosting website such as Airbnb. This can often be a difficult and stressful problem to remedy. Most, if not all, of the commonly used platforms do not require evidence of ownership when an advert is submitted. Instead, they rely on the host having expressly stated compliance with their terms and conditions of use and to have confirmed when signing up that they will comply with local laws and regulations relating to the property. Sometimes, take down requests can be successfully pursued but securing vacant possession of property in this situation can be a costly and time consuming exercise.
So, what about the future for short term lettings?
It is fair to say that the popularity of the Airbnb market is not going to abate any time fast. It may be that over time, hosting sites will put in place more stringent monitoring requirements. Airbnb has already started to do this by introducing a function whereby the calendar bookings for a property will be blocked out automatically once they reach the 90 day limit. However, there are reports anecdotally that such measures can be circumvented so their effectiveness is questionable, although a welcome first step. There is talk in Government presently about the possibility of setting up a database to require people who let out their properties short term to register with the local council first. However, again this needs to be supported locally and will require manpower to enforce. In the meantime, the enforcement of covenants in the lease will continue to remain a powerful tool.
Deborah Rider is a Partner in the dispute resolution team at Goodman Derrick LLP
