Short term city breaks and holiday lettings are becoming increasingly popular. Lien Tran considers the issues for hosts, neighbours and landlords.
The short term lettings market has grown staggeringly quickly over the last decade and its popularity is indisputable. Whilst it may have started as a platform to enable someone to host a traveller in a spare bedroom, or a family to rent their apartment to tourists while they're out of town, it is increasingly attracting interest from a wider host-base.
There has, however, been widespread press coverage about some guests of short term holiday lettings who become nuisance neighbours due to noise, unruly behaviour and general disruption. Some cities have started cracking down on such holiday sublets to placate disgruntled residents and prevent short-term lettings from artificially inflating property prices, particularly in popular tourist destinations. For example, prospective hosts in Greater London are limited to sub-letting entire homes for a maximum of 90 nights per year unless they obtain planning permission for change of use. Restrictions have similarly been imposed in Berlin, Barcelona, New York and San Francisco.
Apart from the regulatory restrictions, there are hidden pitfalls in sub-letting properties, which are not always immediately obvious. For leasehold properties, restrictions in the lease often prevent a tenant from sub-letting the property without the landlord's consent or the lease will limit how the property may be used. Long leaseholders in particular may not realise the restrictions in their lease and assume that they can deal with the property as they wish. They do not appreciate that landlords may be able to forfeit the lease of a host if guests cause problems for neighbouring residents.
Even though the lease did not state that it had to be the tenant's own private residence, the Upper Tribunal considered that there must be a degree of permanence for the property to be used as a private residence. The judge held that the short term lettings were transient and, as a result, the short-term occupiers would not have considered the flat to be their private residence even for the time being.
In Bermondsey Exchange Freeholders Limited v Kevin Conway2, the landlord successfully obtained a fouryear injunction restricting the tenant from sub-letting his flat on Airbnb. The court found that the tenant had breached the terms of the lease, which stipulated that the property had to be used as a residential flat for a single family and could not be sub-let without the landlord's consent.
In April 2017, several newspapers reported on the case of Ashley Gardens Freeholds Limited v Linda Marinelli Landor3 which involved an 81-year old "bohemian" poet who let out her Westminster apartment for late night "soirees" and, on one occasion, flamenco dancing. In 2010 and 2014, this tenant had been found by two property tribunals to be in breach of a clause not to "use other than a private residential flat in one occupation only". After repeated breaches of this clause, the tenant found herself back in court in April 2017 to resist the landlord's forfeiture application. The judge held that
There has been a spate of recent cases of individuals who have found themselves in disputes with their neighbours and landlords, after welcoming guests into their homes, some of which have resulted in litigation. In Nemcova v Fairfield Rents Ltd1 , the Upper Tribunal held that, by letting her flat through Airbnb, a long leaseholder had breached the clause in her lease requiring the flat to be used as "a private residence" she had "demonstrated over very many years that she either does not understand the rules or feels that they do not apply to her". The court ordered forfeiture, but with a six-month delay to give the tenant an opportunity to sell the flat and avoid the complete loss of a valuable asset.
When it comes to forfeiture, however, landlords should bear in mind that the tenant can apply for relief from forfeiture. Even if the correct procedures have been followed to forfeit the lease, a court may still grant relief if the tenant is willing to comply with the lease covenants and pay the landlord's costs. As an alternative remedy, a landlord may wish to consider seeking an injunction to restrain the tenant's use of the property. If the tenant defends the landlord's application, then the landlord will have to satisfy the court that the tenant has breached the lease.
With the short term sub-letting market rapidly expanding, we could see more such disputes reaching the courts. The judge in Nemcova emphasised that each case will depend on its specific facts, so there is
no guarantee that a landlord will be able to successfully argue a breach of the lease in every case. However, the court rulings and associated publicity should ensure that hosts become aware of the legal pitfalls of short term lettings and consequently check restrictions before opening their homes to holiday makers.
What is clear is that the popularity of this short term sub-letting market is not going anywhere and, as long as hosts comply with any restrictions applicable to them and their properties, this growing market remains appealing to both hosts and customers.