Is letting through Airbnb a breach of lease?

18 February, 2020

The rise in the demand for short-term lets has led to an increase in the popularity of online letting platforms such as Airbnb where people list their properties for short stays or “holiday lets”. However, where the ‘host’ owns their property under a lease (as is the case with most flats), they may find they are in breach of the lease covenants they need to comply with.  Given the prevalence of short-term lettings, landlords have had to become more pro-active in monitoring their properties and seeking advice from solicitors as to what remedies are available to them.

Where a leaseholder is in breach of lease, the landlord should take action.  Effective options include applying for an injunction to prohibit the letting or commencing proceedings to forfeit the lease.  The courts and tribunals have recently considered whether temporary lettings through sites such as Airbnb amount to a breach of covenant.

User covenant

Most residential leases include a restriction on how the property is used and often oblige a leaseholder “not to use the premises for any purpose other than as a private residence“, or words to that effect.  The Upper Tribunal’s decision in Nemcova v Fairfield Rents Ltd (2016) determined that short-term lettings through Airbnb was a breach of the user covenant as there must be a degree of permanence, beyond being there for a weekend or a few nights in the week, for a property to be classed as a private residence.

Similarly, the court in Bermondsey Exchange Freeholders Ltd v Ninos Koumetto (2018) found the leaseholder was in breach of a covenant requiring the flat to be used “as a residential flat with the occupation of one family only“.  The Judge held the arrangement was “short-term temporary accommodation for transient visitors paying for such use by way of a commercial hire” and so a clear breach of the user covenant.

Alienation covenant

Residential leases often restrict a lessee from sub-letting or sharing or parting with possession of their property.  In the Bermondsey Exchange Freeholders case the court found that the tenant’s letting via Airbnb and other platforms was also a breach of the alienation covenant which prohibited “subletting and permitting others to occupy the flat otherwise than by an authorised sublet or assignment“.

Remedies

As mentioned above, the most effective remedies available are injunctive relief and forfeiture.  If obtained, a court injunction will prohibit the lessee from letting the flat as a short-term let and breaching the court order could have very serious consequences.  It also sends a clear message to any other leaseholder in the building.  In the Bermondsey Exchange Freeholders case, an injunction was awarded even though the breach had been remedied and the tenant was faced with an expensive costs order.

Forfeiture proceedings can be lengthy but, if successful, result in the landlord taking back possession of the flat.  Given the severity of the sanction, often the threat of forfeiture proceedings can be enough of a deterrent and result in the leaseholder ceasing to let.  If not, the first step is for the landlord to obtain a determination that the leaseholder is in breach of his lease.  Cripps Pemberton Greenish have recently been successful in obtaining such a determination from the First-Tier Tribunal on behalf of a landlord client whose tenant was letting his flat on Airbnb.

Conclusion

It is highly likely that a leaseholder who is letting their premises on sites such as Airbnb will be in breach of the terms of their lease and the landlord should take steps to stop the letting without delay.  That said, every lease must be considered in context, and subtle differences in the wording of the covenant, or type and duration of the letting, will impact whether or not a leaseholder is in breach.  If in breach, a leaseholder may be facing court proceedings or, even worse, at risk of losing their property.  It should also be noted that a mortgage company will likely have similar rights of action as a landlord if such lettings are in breach of the leaseholder’s mortgage provisions.

While a landlord could grant a licence permitting a leaseholder to let his flat out on Airbnb, it could prove problematic.  Not only are there potential issues with nuisance to neighbours or other residents, but also the added security risks of having transient occupiers accessing the building.  Furthermore, landlords often covenant that all leases in the building will be the same and that they will enforce any covenants entered into by a leaseholder at the request of another.  Permitting short-term lets could therefore result in the landlord being in breach of lease himself if he then is unable to enforce a covenant when requested.

In reality, it is an inherently difficult task, if not impossible, to adequately police unauthorised sub-lettings so landlords should, as a preventative measure, communicate to all leaseholders that any such lettings are not permitted and action will be taken.  As the courts hear more cases on the issue, awareness will improve on both sides.  Any leaseholder considering using platforms like Airbnb should check the terms of their lease thoroughly and would be ill-advised to proceed if the lease prohibits it.

Should you need any further guidance on the issues raised, please contact Amy Jackson.