Short-term letting: an update on Nemcova v Fairfield Rents Ltd [2016] UKUT 303 (LC)

When considering letting out your property on a short-term basis, the starting point should always be to thoroughly read the terms of your lease. If your lease does not prevent you from subletting on a short term basis then you should consider whether you will require planning permission from the local authority. The case of Nemcova v Fairfield Rents Ltd [2016] UKUT 303 (LC) is the most recent decision regarding this type of letting. This case considers one particular issue, whether the lessee breached a private residence user covenant.

What is considered to be a short-term letting? The answer is anything from few days up to six months period.  

Background

Ms Nemcova, was the leasehold owner of a residential property. Her lease was for a term of 99 years. She granted several short-term lets of her property, having advertised the property on the websites such as Airbnb, Holidaylettings and Trip Advisor. Most of the lettings were for business visitors working in London and not holiday guests. For most of the other time Ms Nemcova occupied the property herself as her main residence.

The lease contained a covenant “not to use the demised premises or permit them to be used for … any purpose whatsoever other than as a private residence”. There was no prohibition on sub-letting in the lease.

The freeholder applied to the First- Tier Tribunal (“the FTT”) for a determination under s.168(4) of the Commonhold and Leasehold Reform Act 2002 that Ms Nemcova was in a breach of the user covenant as this required her not to use the property other that a private residence.

Ms Nemcova did not dispute the lettings as such, however she argued that as the property remained her main residence and she paid all the relevant bills, the property contained the characteristics of a private residence.

Notwithstanding the lessee’s arguments, the FTT determined that there was a breach of the user covenant by the lessee. Ms Nemcova appealed to the Upper Tribunal.

The Upper Tribunal upheld the FTT decision that Ms Nemcova was in breach of the user covenant in her lease as the short-term lettings could not be considered to be amounted to use other than as a private residence.

Points to note from the Decision of the Upper Tribunal:

The distinction between “a” private residence and “the” private residence.

The user covenant required Ms Nemcova to use the property as a private residence which suggests that she was able to have more than one residence at any one time. The use of the article “the” in the private residence covenant implies that the residence is the main and only residence of the occupier.

Duration of the occupier's occupation

There has to be a degree of permanence for a property to be used as the occupier’s private residence. Occupying the property few nights a week or the weekend does not constitute occupation as a private residence.

Conclusion

As in this particular case, the Upper Tribunal determined that Ms Nemcova was in breach of the user covenant. The impact of the breach could be significant for the lessee as the landlord may apply for an injunction to stop the breach and claim damages or alternatively apply to court to forfeit the lease. The lessee is also likely to be required to pay substantial sums towards landlord’s legal costs.

While considering as to whether to sublet your property, you should be aware of other clauses such as parting with possession or sharing possession; nuisance or annoyance or inconvenience to the lessor or other occupiers of the building; carrying out a trade, business or profession from the property. You should be careful and make sure that no business tenancy is created by your sublet; otherwise it may be difficult to evict the lessee at the end of the subletting term.

You should always seek legal advice prior to deciding to sublet your property.

Karen Bright is a Partner at Bishop & Sewell, Dispute Resolution Team. If you need advice on property matters, please contact our Dispute Resolution Team on propertyexpert@bishopandsewell.co.uk or by telephoning 020 7631 4141.