Airbnb is a modern phenomenon. Its cultural impact has been to create an industry out of renting your own home to strangers on a short-term basis. Many people now view it as a complete alternative to hotels. But what are the legal implications?
Over the summer months, increasing numbers of people will be taking holidays in other people’s homes, through rentals sourced through the hugely successful Airbnb.
An alternative to hotels, Airbnb offers homeowners the ability to make money by renting out their properties whilst they are away. It also provides another platform from which to market a second home or investment property. Whilst Airbnb is undoubtedly an ingenious and highly successful model, it is not without legal implications and potential problems. This is true for renters, but it is especially so for those wishing to rent out their properties – or “hosts”, as Airbnb calls them.
Perhaps the most frequently overlooked potential issue is whether a homeowner is permitted by local planning law to rent out their property on a short-term basis. Until recently, the Greater London Council (General Powers) Act 1973 required Londoners wishing to rent out their properties for fewer than 90 consecutive nights first to apply for planning permission to do so. That requirement was recently relaxed by the Deregulation Act 2015, which now generally permits short-term lettings for a maximum period of 90 days. Nevertheless, care must still be taken: it is possible for local planning authorities to disapply these relaxations for particular areas, or even particular properties.
For owners of leasehold properties, the possible issues multiply. A residential long lease will typically contain detailed “alienation” provisions, setting out the circumstances under which the property may be sublet. It is common for such provisions to contain an absolute prohibition on short-term lettings, or at least a prohibition without landlord’s consent. It is also possible that the lease will prevent the tenant from using his property for the purposes of running a business or taking in paying guests, both of which provisions may be breached by a holiday letting. It is crucial that the provisions of the lease be carefully checked, as any breach may lead to forfeiture action being taken by the landlord.
Another important practical risk for a landlord is what happens if those in occupation refuse to leave at the end of the agreed period. Whilst this may seem like a remote possibility, it has been known to happen in the context of holiday rentals. There is also an increasing phenomenon (particularly in London) of unscrupulous people taking either short or long term rentals and then subsequently re-letting them for profit, often placing the homeowner in breach of both planning restrictions or the covenants of his own lease, as discussed above.
Ordinarily, under the Protection From Eviction Act 1977, it is a criminal offence to evict a residential occupant without a court order. However, the 1977 Act excludes holiday lets, meaning that a landlord faced with this problem can technically change the locks at the end of the agreed term. That said, even in these circumstances it is an offence for a landlord to use – or even threaten the use of – force in the process of removing unauthorised occupants. To make matters worse, a landlord is unable in such circumstances to ask for police assistance: whilst section 144 of the Legal Aid, Sentencing and Punishment of Offenders Act 2012 criminalised squatting in residential premises, it does not apply to persons who were originally in lawful occupation, for example under the terms of a holiday rental agreement. Therefore, in practical terms, in such circumstances it will often be necessary for the landlord to commence County Court proceedings for possession, likely at great cost of time and resources.
To minimise some of these risks, there are several practical steps which a homeowner can take before letting out a property through Airbnb. Airbnb itself offers some assistance with this, for example through providing a mechanism whereby the host can require a deposit to be paid by the guest. In the event of an argument between the host and guest as to whether any amounts should be deducted from the deposit, Airbnb’s disputes service will assist in mediating and resolving the dispute. Airbnb also offers what it describes as host protection insurance, a policy which covers personal injury and property damage in certain circumstances. However, it is wise for would-be Airbnb hosts to check their own household insurance policies and investigate taking out additional insurance cover, if necessary.