Short-term lettings prohibited by lease covenants?

20 September, 2016

Queue of peopleIncreasing numbers of people are advertising their own homes as places to stay, on the internet and elsewhere, as alternatives to hotels in order to make some extra money.  According to Wikipedia, Airbnb now has over 1,500,000 listings for such properties, in 34,000 cities and 191 countries.

 

No doubt many of these listings will be made by those who own the freehold of their homes, but in the case of Nemcova v Fairfield Rents Ltd [2016] UKUT 303 (LC) the Upper Tribunal (Lands Chamber) has considered whether to enter into a series of short-term lettings in this way was a breach of covenant contained in a leaseholder’s long lease of a flat.  The covenant provided that the flat could not be used for any purpose whatsoever other than as a private residence, and it was not disputed that the leaseholder let out the flat for a night or two at a time for around 90 days a year.

 

The lessee argued that the lease should be construed as a whole, and that provided that the flat was occupied as a private residence by someone, the basis on which they were occupying did not matter:  the words “private residence” simply meant considering whether the flat could be described as such at a practical level by looking at its physical characteristics.

 

On appeal from the First-tier Tribunal the Upper Tribunal disagreed, and found that for the covenant to be observed the occupier for the time being had to be using it as his or her private residence.  In granting short term lettings to a series of other occupiers, who were mainly travelling on business, the leaseholder had not achieved the level of permanent occupation required, and had therefore breached the covenant.

 

We now have Upper Tribunal authority that short term, holiday or Airbnb type lettings will breach lease covenants only to use a flat as a “private residence”.  Tenants should check their leases with this in mind before entering into this kind of arrangement, and the decision may provide ammunition for residential landlords seeking to curtail their tenants’ lettings of this type.