Bermondsey Exchange Freeholders Limited v Ninos Koumetto (as trustee in bankruptcy of Kevin Geoghehan Conway) (unreported)

On 1 May 2018, an appeal judge continued an injunction restraining a leaseholder from letting his flat as AirBnB accommodation, and approved the lower court's finding that it was a breach of his lease.

Kevin Conway was the leaseholder of a flat in the Bermondsey Exchange building in South London. It was once a warehouse but was converted into 18 flats let on 999-year leases.

Initially, Mr Conway sublet the flat on assured shorthold tenancies but, from 2015, he began using his flat as temporary accommodation through AirBnB and other online agencies. The landlord freeholder (a company in which each flat owner owns one share) raised concerns about additional nuisance and security issues and the detrimental impact on a 'sense of community' of casual overnight use.

The freeholder sought an injunction to restrain Mr Conway from using the flat in that manner. The judgment of District Judge Desai in the Lambeth County Court resulted in an injunction restraining Mr Conway from using the flat for temporary lettings. Despite Mr Conway's protestations, in her judgment, she said:

  • the listing details showed that the flat had been used for temporary lets;
  • the landlord's agents had not consented to use for temporary lets; and
  • temporary lettings were a clear breach of the lease.

Mr Conway became bankrupt shortly before the judgment, but his trustee in bankruptcy appealed against the judgment.

His Honour Judge Luba QC, who heard the appeal at the Central London County Court, rejected the appeal on all grounds, and confirmed the injunction.

In particular, he found that:

  • AirBnB lettings amounted to a subletting or licence in breach of the prohibition in the lease on parting with or sharing possession or permitting any company or person to share occupation of the flat except by means of an assignment or underlease with the consent of the landlord; and
  • the flat was not being used as a residential flat but for a commercial hire use as short-term temporary accommodation for paying transient visitors - that was a breach of the user covenant restricting its use to a residential flat with the occupation of one family only.

The terms of Mr Conway's lease were standard terms found in most residential leases. Unless the landlord consents to the arrangements, it is clear that flat owners cannot lawfully use their flats as AirBnB accommodation without breaching the terms of their leases and risking court proceedings if the landlord objects.

Another argument could have been made that the AirBnB use was a breach of planning covenants in the lease, or the freeholder could have complained to the local planning authority. One of the more common criticisms of AirBnB lettings is that they may constitute a breach of planning for residential premises. Serviced apartments are not specifically identified in either the Planning Acts or within the Town and Country Planning (Use Classes) Order 1987. On a case by case basis, this type of product tends to be classified as either C1 (hotel), C3 (residential) or, if a proposed use does not fit neatly into one of the established use classes, then it is regarded as being "sui generis" (effectively, in a class of its own).

These kind of disputes are likely to increase in frequency. According to analysis from Colliers in 2017, the number of properties listed on AirBnB in London alone had grown by 57% - from roughly 88,000 in 2015 to more than 138,000 properties by the end of 2016. Of these listings, almost 54% were offered by hosts with more than one listing, up from 48%. Hoteliers continue to voice concerns about the scale of professional letting via the site and the lack of regulation.

Given the number of leasehold flats in London, it is likely that a good proportion of the current AirBnB arrangements will be in breach of the terms of the owners' leases and may breach planning controls. Flat owners should take note before signing up to AirBnB or similar arrangements with other agencies.