Leaving your apartment empty for a few days? Why not let it out? Airbnb and other similar providers facilitate the renting out of premises on short term lets by allowing users to advertise availability on its site. The onus is placed on the site user to ensure that all necessary consents are obtained (e.g. mortgagee’s approval or superior landlord’s consent) and the user is advised to check that the letting does not breach any obligations contained in the lease of the premises.
In the recent decision of Iveta Nemcova v Fairfield Rent Limited [2016] UKUT 303 (LC), the Upper Tribunal (Lands Chamber) decided that a short term letting constituted a breach of a covenant contained in a user’s long lease of a flat which prohibited use of the property other than as a private residence.
Facts of the case
The tenant was the owner of a 99 year lease. The lease contained a covenant on the part of the tenant not to use the flat for any purpose other than as a private residence. The tenant advertised the availability of the flat for short-term lettings on Airbnb and, for discontinuous periods of some 90 days in total, she granted short-term lettings of the property to third parties. The landlord sought a declaration that, in granting short-term lets, the tenant had breached the covenant not to use the flat for any purpose other than as a ‘private residence’.
Decision
The question for the tribunal was whether occupation of the flat on a short-term basis was consistent with the use of the flat as a ‘private residence’. In constructing the covenant, the tribunal opined that there should be a connection between the occupier and the residence, such that the occupier would consider that he or she was occupying the flat as their residence (rather than, for example, as one might occupy a hotel room).
The tribunal went on to consider whether the duration of the letting affects the use as a private residence and drew the conclusion that the duration of the occupier’s occupation is material. For the premises to be used as a private residence there must be some degree of permanence going beyond being there for a weekend or a few nights in the week. In the view of the tribunal it could not be said that, by occupying the property for a few days, a person was using it as their private residence.
It was therefore held that the grant of short-term lettings (days and weeks, rather than months) was in breach of the user covenant contained in the lease.
Owners of leasehold properties wishing to let out their property on a short-term basis should carefully consider the terms of their lease before entering into short-term lets. In particular, the user covenants and other restrictions on occupation contained in their leases should be considered.
Following the above decision, it is likely that landlords (particularly, one might speculate, in apartment blocks with considerable owner-occupation) will be alerted to the prospects of frustrating short-term lettings by court action. It remains to be seen, however, whether landlords will have the appetite to pursue injunctions to prohibit such underletting or, ultimately, to seek orders to forfeit the leases of uncompliant tenants in circumstances where it may be difficult to evidence any monetary loss.