It's not always a breeze to let your property out as a short term holiday let...
Recent analysis of Land Registry data has indicated that one in four property purchases in the last 12 months was a buy-to-let investment.
Historically many would have followed the more traditional model of letting out a property for six months at a time on an assured shorthold tenancy. However, and somewhat unsurprisingly, the relative ease of earning a supplementary income by renting out your property via Airbnb has led to a meteoric rise in the number of properties available for short term holiday lets.
While many potential Airbnb hosts are worried about whether their property will stand out from the crowd; the recent Upper Tribunal case of Nemcova v Fairfield Rents Ltd [2016] UKUT303 (LC) has demonstrated that a bad review is not the only thing that would-be hosts should be concerned about.
Typically, residential leases will contain restrictions limiting the use of the property and more often than not (as was the case in Nemcova) the leaseholder will covenant:
“Not to use or permit the Property to be used for any illegal or immoral purpose or for any purpose whatsoever other than as a private residence”
This may be accompanied by a covenant:
“not to do or permit to be done any act or thing in or upon the Property or any part of the Property which may be or grow to be a damage nuisance or annoyance to the Landlord or the other occupiers in the Building”
The leaseholder in the Nemcova case had let out the property via Airbnb around seven times in the last twelve months and the other leaseholders in the building had complained to the landlord who in turn brought a claim against the leaseholder for a breach of the covenant restricting the use of the property to a “private residence”.
The First Tier Property Tribunal found in favour of the landlord but the leaseholder appealed to the Upper Tribunal. On appeal the Upper Tribunal also found in favour of the landlord holding that the use of the property for short term holiday lets was a breach of the covenant not to use the property “other than as a private residence”.
Notwithstanding that the Upper Tribunal were keen to confine the judgment to the facts of the case stating that:
“Each case is fact specific, depending upon the construction of the particular covenant in its own factual context”
The ruling contains several principles which parties may find useful when considering whether short term holiday lets may constitute a breach of covenant.
Ultimately the Upper Tribunal held that the duration of the short-term let was a deciding factor in the Nemcova case and that there would need to be “a degree of permanence” if the use was to satisfy the private residence covenant and this was unlikely to be satisfied where the leaseholder was only staying at the property for several days.
It is worth pointing out that the landlord in the Nemcova case did not bring a claim alleging a breach of the covenant “not to do or permit anything which may be or become a nuisance” and even if you are of the opinion that short term lets will not be in breach of the usage covenants, rowdy guests could subsequently cause nuisance or inconvenience to a landlord or other occupiers of the building.
There are also planning issues to consider, for instance, some local authorities specify that a property can only be used as a holiday let for a limited number of days per year.
If you have purchased, or are considering buying a leasehold property to use as a holiday let it is advisable to review the terms of the lease to ensure that you will not fall foul of the various tenant covenants by renting your property out as a holiday let.
Should you fail to check your lease and take advice you may end up buying a flat which isn’t fit for your purposes. In these circumstances CBG Law would be happy to advise you on your options.
If you would like to discuss the terms of your lease or are considering buying a leasehold property as a buy-to-let investment, then please contact CBG Law’s residential conveyancing team on 0207 436 5151 or info@cbglaw.co.uk to obtain a competitive quote and set up an initial meeting.
