As the summer holiday season approaches, people might be considering renting out their spare rooms or homes on a short-term basis on platforms such as Airbnb. This article will explore the possible legal risks that this can carry.
If homeowners, particularly leaseholders, intend to use Airbnb to rent out their property, they need to be aware of the legal pitfalls involved. Two important issues that are regularly overlooked are breaching the terms of the mortgage and breaching the terms of the lease.
If there is a mortgage on your property, you should be aware of the terms of your mortgage agreement before considering renting out your home. The relevant rules regarding short-term letting can vary from lender to lender. The majority of lenders prohibit the homeowner from renting out their property without obtaining the lender’s prior consent, and some lenders will not allow short-term lettings at all.
If homeowners fail to gain consent from their lender, they risk breaching the terms of their mortgage agreement. If it is found that there has been a breach of the mortgage terms, the homeowner can face serious consequences including a fee, an increased mortgage rate, immediate repayment of the mortgage or even repossession.
It is therefore vital that homeowners examine their mortgage agreement before they place their home on Airbnb. It is also important that homeowners are aware that time limitations can be attached to a lender’s consent restricting how long the property can be let for.
If you are looking to rent out leasehold property on Airbnb, then you should carefully review your lease before doing so. Many leases will not allow the use of a property for short-term lettings.
In 2018, an Appeal Court upheld an injunction which prevented a leaseholder from letting his flat to guests on Airbnb. The Court held that by letting out his flat using Airbnb, the leaseholder had breached terms of his lease. It held that:
- the flat was not being used as a residential flat, but for short-term commercial hire for paying guests, which breached the user covenant restricting its use to a residential flat in the occupation of one family only; and
- letting the property on Airbnb amounted to a subletting or licence, which breached the prohibition on parting with or sharing possession or permitting any company or person to occupy the flat save by way of an assignment or underlease.
In that case, the landlord had raised concerns about the additional nuisance and security issues and the adverse impact on a ‘sense of community’ that casual overnight use has.
The covenants and terms of the lease in question were standard terms found in most residential long leases, which means that it is probable that a high proportion of Airbnb arrangements will be in breach of the homeowner’s lease.
The leaseholder must obtain consent from the landlord before letting their flat on Airbnb. If a landlord discovers that terms of the lease have been breached and objects to the breach, legal action may be taken against the leaseholder.
A further issue that homeowners need to consider is planning restrictions within their local authority. Some local authorities have restrictions that state that the use of residential premises for temporary accommodation will be considered as a ‘change of use’, for which planning permission is required. Homeowners should check with their local authority to ensure that they are not breaching planning restrictions before they let their property on Airbnb.
With the increasing popularity of online portals such as Airbnb, the number of disputes of such nature is likely to increase. The terms of your mortgage and your lease should be thoroughly checked and fully understood before you let your property on platforms such as Airbnb.