The growing popularity of Airbnb and other online temporary letting agencies is creating fertile ground for disputes between leaseholders and their management companies and freeholders.
Airbnb is an online platform that allows its users to rent out their homes, rooms and apartments to visitors. Leaseholders in England and Wales have to be aware of the law, rules, regulations and other legal agreements that they may fall foul of, if they intend to use Airbnb to rent out their property.
However, if you own a leasehold property, the rules around renting your property on a temporary basis can catch you out if you don’t check the terms of your lease.
What might the lease say:
- Not to part with or share possession of the whole of the flat or permit any company or person to occupy the flat save by way of an assignment or underlease of the whole of the flat.
- Not to assign or underlet the whole of the flat without the prior written consent of the landlord.
- Not to use or permit the use of flat or any part thereof otherwise than as a residential flat with the occupation of one family only.
- Not to run a business from the property.
As well as the potential breaches noted above, the following should also be considered:
- Health and safety issues
If you let the property as a landlord, you would be obliged to comply with health and safety laws. If you are a leaseholder with a long lease, and decide to let the property as holiday accommodation, the health and safety laws would apply to you as you would be considered to be a landlord under the law.
The Regulatory Reform (Fire Safety) Order 2005, s.3 states that the responsible person for complying with the Order is the person who has control of the premises (as occupier or otherwise). In connection with the carrying on by him of a trade, business or other undertaking (for profit or not). Airbnb is a holiday let. And the leaseholder would be carrying out a business which means that they would need to comply with the Order.
- Insurance
In most leasehold flats it is usually the freeholders’ obligation to take out insurance to cover the entire building. And the leaseholder may choose to secure its contents by obtaining contents insurance.
Leaseholders must make sure that if they intend to let their property as a holiday let on Airbnb. But their insurance is not invalidated by so doing. Property owners should inspect both of the policies to ensure that they are not in breach of either. Furthermore, they could be in breach of their mortgage terms if they do not have adequate insurance in place.
Airbnb states on its website that it offers Host Guarantee and Host Protection Insurance. But it adds that “this does not take the place of homeowners or renters insurance or of adequate liability coverage.”
- Mortgage lender
Leaseholders who have mortgaged their property need to ensure that by letting their property as a holiday let on Airbnb they do not breach the terms of their mortgage.
Part 1 of the Council of Mortgage Lenders handbook, at note 16.4, states that the lender should advise the borrower that consent is to be obtained if the borrower wishes to sublet the property after completion. Note 16.4.3 states that the lender reserves the right to change the terms of the mortgage or requires a higher rate of interest if the borrower decides to consider the request for consent.
It is usually a term of the mortgage that interest rates are available for as long as the owner occupies the property as their only or main residence. Any letting may require consent in writing from the mortgage lender and failing to do so may lead to a demand for repayment in full or repossession of the property.
- The Lease
Leaseholders need to ensure that the lease does not have any clauses preventing them from letting as a holiday let on Airbnb, as noted above.
- Pets
If leaseholders intend to allow pets in their property, they would need to ensure that the lease allows pets in the property. Otherwise, the leaseholder may find himself being in breach of their lease.
- Noise
As a leaseholder you could be in breach of your lease if your guests are causing noise in the property, and the freeholder, or any of the other leaseholders can bring a claim against you. It has been held that by permitting Airbnb guests to use the property, and those guests, either having parties or the leaseholder permitting them to do so, the leaseholder would be responsible, as if he were hosting those parties.
The above list is not exhaustive, but should be considered if you are considering a short term let on your leasehold property.
