Airbnb Case means that thousands of hosts may be breaching their lease?

Question: When is it not acceptable to rent out your property as a “holiday let”? 
Answer: If you are a tenant under a lease described for “use as a private residence”.

Background

Airbnb is an online marketplace that enables people to list, find, then rent holiday homes for a processing fee. The website is a worldwide sensation and has over 1.5 million listings in over 30,000 cities, in 191 countries.  There is also an estimated 4 million leaseholders in the UK.

In a recent decision of the Upper Tribunal (“UT”) known as the Airbnb case, the Upper Tribunal property section, the highest level property court in the UK, has provided guidance on what is meant by the term “a private residence” when contained in a lease.

The Case

In the present case, a landlord sought a determination from the UT that its tenant was in breach of its lease of a residential flat.  

In the tenant’s covenants (the section that determines what a tenant can and can’t do), the lease contained agreement by the tenant not to use the premises “for any purpose whatsoever other than as a private residence”.

In seeking to generate some additional income from the property, the tenant let out the property as a short term holiday let.  There was no dispute as to facts, and the tenant admitted to offering short term lettings of the flat and to advertising on such websites as Airbnb. The facts were identified that the tenant stayed at the flat only about three or four days per week and had let out the flat for approximately 90 days a year.

The case therefore turned on whether or not using the flat for short term lettings breached the private residence covenant?  The UT decided that it did!

The UT held that there must be “a degree of permanence going beyond being there for a weekend or a few nights in the week”.

The UT also said: “the occupation is transient, so transient that the occupier would not consider the property he or she is staying in as being his or her private residence even for the time being”.   It ruled that the tenant was in breach of its lease.

What have we learned?

Holiday or short term websites advertising “vacation stay” accommodation such as Airbnb are increasingly popular.  However property owners must be careful to ensure that they have the necessary power(s) to offer their property for such uses, and this is particularly relevant where the property is leasehold or where there is a lender.   If in doubt, you speak with a lawyer and seek the written consent of the landlord and/or lender.

A breach of the lease can offer a landlord a host of remedies including contractual damages or even forfeiture, which is the loss of the lease interest altogether.  Similar remedies exist in favour of a lender where a breach of mortgage conditions is proved.

If you have any queries in connection with your lease or property generally, then please contact our team of Commercial Property Specialists, Peter Wilson and Ian Bowker on 01952 297979 or by email to peterw@terry-jones.co.uk or ianb@terry-jones.co.uk.

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