Letting with Airbnb: be careful not to breach a covenant in a residential lease
Kesena Ohazurike explores the issues that can arise from covenants in a lease and short-term lets.
The number of people using accommodation websites such as Airbnb has rapidly increased throughout the UK over the last five years. Websites like Airbnb provide an alternative to hotels or hostels and are often viewed as, a ‘home away from home’ while on holiday. According to analysis from Colliers, in 2017, the number or properties listed on Airbnb in London alone had grown by 57% from approximately 88,000 in 2015 to more than 138,000 by the end of 2016! That really does demonstrate the way that people book holiday accommodation is changing.
Although owners of long leasehold properties (usually flats and apartments) may own a long lease in their properties, they need to be aware that there may be restrictions in the leases that could prevent them from letting their properties through Airbnb-style arrangements.
Below, we look at three cases that illustrate the difficulties some leaseholders have experienced when letting their properties through Airbnb-style arrangements and short terms lets.
No prohibitions against subletting in lease
Nemcova v Fairfield Rents Ltd  UKUT 303 (LC)  1 P & CR 43 concerned a breach of covenant in a lease that prohibited the use of the property in question as anything “other than as a private residence”. The facts were, briefly, as follows:
- Ms Nemcova was the owner of a leasehold flat; she was often absent, so she advertised her flat for short-term lets;
- Her lease did not contain prohibitions against subletting, short-term letting, holiday letting, business or commercial use;
- Her landlord tried to claim possession of the lease through the process of forfeiture but Ms Nemcova denied that she was in breach of the covenant specifying that she was not to use the flat for any purpose whatsoever other than as a private residence;
- The Upper Tribunal (Lands Chamber) held that occupation for a few days did not amount to use as a private residence. Therefore, Ms Nemcova was in breach of her lease.
In Roundlistic Ltd v Jones and another  UKUT 325 (LC), the lease contained a more stringent clause considered by the Upper Tribunal on an appeal from the decision of the First Tier Tribunal. In brief, Mr Jones purchased a maisonette in 2013, comprising a lower and upper maisonette. He lived in the lower maisonette while the upper maisonette was let on an assured shorthold tenancy. In 2015, due to work commitments, Mr Jones was due to move to Milan for two years and so he sub-let the lower maisonette. The property was subject to a covenant “not to use the premises hereby demised or permit the same to be used for any purpose whatsoever other than as a single private dwelling house in the occupation of the Lessee and his family.”
Breach of lease
The Landlord, Roundlistic Ltd, brought an application in the First Tier Tribunal for a determination of breach of lease under s168(4) of the Commonhold and Leasehold Reform Act 2002. On appeal, the Upper Tribunal held that the covenant prevented sub-letting by the lessee.
Finally, in the 2018 case of Bermondsey Exchange Freeholders Limited v Ninos Koumetto (as trustee in bankruptcy of Kevin Geoghehan Conway)  4 WLUK 619, Mr Conway, a leasehold owner, let out his flat using Airbnb. The landlord company, which consisted of the other flat-owners, were concerned that the short-term lets could lead to nuisance and security issues. Use in this way amounted to a breach of covenants in the lease against subletting and permitting others to occupy the flat otherwise than by an authorised sublet or assignment, and of a user covenant requiring the flat to be used as a “residential flat with the occupation of one family only.” The landlord successfully obtained an injunction to prevent Mr Conway from using his flat for Airbnb-type lets. This also included a penal notice, which meant that if Mr Conway failed to comply he would be in contempt of court and could face a fine, imprisonment or seizure of assets.
Therefore, owners of leasehold properties should be mindful of the pitfalls that they may encounter as a result of Airbnb-type short-term let arrangements for leasehold properties, because they could be in breach of their lease.
To discuss any of the issues raised in this article, including lease issues, or landlord and tenant issues in general, please contact Faye Schneider at email@example.com or Angelina Gritseniouk at firstname.lastname@example.org.
Posted on Apr 1st, 2019 by Lyons Davidson