Problems with short term or holidays lets

Karen Bright from Bishop & Sewell looks at the recent increase in short term holiday renting in England.

There has been an increase in the amount of websites facilitating short lets such as Airbnb, Primelocation, Flat-club etc, particularly in larger cities and towns. Property owners are more and more inclined to rent their accommodation as a short holiday let as this can be more lucrative. In doing so, not many property owners consider whether letting the property in this way would constitute a breach of various covenants in the lease, and if there could be a breach, what may be the consequences of it.

The first step is for the property owner to check the precise wording of the lease. If the lease states that the property can only be used as a “private residence / dwelling or occupation by a single household”, then the property owner is likely to be in breach of the covenant. A dwelling can be defined as a place where someone dwells and which is treated as their home. Moreover, residential flats are flats for use as permanent residences and as such do not include holiday flats.

If the lease contains a covenant “not to carry out a trade, business or profession from the property”, a holiday letting is likely to be classed as a commercial arrangement, and would also be a breach of this covenant.

A property owner should check if the lease contains a provision that restricts subletting or sharing occupation and possession. If the lease is mortgaged, whether there is a restriction in the mortgage conditions prohibiting the borrower from letting the property without the consent of the lender.

Most leases contain a covenant not to allow the property to be used “for any act or thing which shall or may become a nuisance, annoyance or inconvenience to the lessor or other occupiers of the building”. Even if you are not prevented from letting the property as a holiday let, you must ensure that there is no noise or other disturbances at the property such as parties which could potentially cause nuisance to other residents.

There have been a number of reported incidents where a property owner lets a property through the usual websites, which is then used for an “illegal rave” where hundreds of people show up, the police are involved and major damage is caused not only to the property itself but also to other properties and common parts. It should be noted that it will be the property owner’s responsibility to pay for any damage, not only to its own property but also to any other. It is therefore essential to check the references of who the property is being let to.

It is important to consider all the pros and cons before deciding whether to rent your flat as a short holiday let. As mentioned above, if a property owner is in breach of the lease, a landlord may apply for an injunction to stop the breach and claim damages. Alternatively, a landlord may apply to court to forfeit the lease, and if successful, a property owner would lose its flat. In addition to the above, a property owner is likely to find itself paying significant sums towards landlord’s legal costs.

Karen Bright is a Partner at Bishop & Sewell, Dispute Resolution Team.   Tel: 020 7631 4141