More and more homeowners and occupiers are being drawn to Airb’n’b type opportunities by the suggestion that they offer significant increased rental returns which will help to reduce mortgage balances quicker than one might anticipate. The Airb’n’b concept launched in 2007 as a way for American art students to cover their rent. It has since exploded in popularity with listings all over the globe. It is reported that more than 400,000 visitors to Dublin stayed in Airb’n’b properties last year and there was talk that such lettings generated more than €200 million to the Irish economy.
However, Airb’n’b is not without its pitfalls which are only now beginning to emerge. In some countries, suggestions of anti-social behaviour attributed to short term guests have caused some cities to take quite drastic measures. New York State has enacted a law imposing fines of to $7,500 on “hosts”. Barcelona has ruled that any home rented out to visitor must be included in a tourism industry register and must be licensed. In London, a maximum 90 day rule applies. A fine of GB£20,000 or criminal charges can arise if a short term let exceeds 90 days in a single year.
If you are contemplating/providing this type of service from your home/rental property, or if you are a landlord whose tenants are providing an Airb’n’b service, beware of some of the pitfalls:
- Legal Status of your guest: if the occupancy is for longer than a night or two, your “guest“ may not be a bare licensee without occupational rights. In some cases, properties have been advertised as a short term let but, in reality, a deposit has been paid to the “host” and a monthly sum is paid for the duration of the stay. In law, this could be deemed a “tenancy” giving rise to occupational rights to the guest and obligations for the landlord under the Residential Tenancy Acts 2004 & 2015. It would, in our view, be difficult to argue otherwise.
- Breach of your Lease: If you are an apartment owner or occupant, you may be in breach of the covenants and conditions of your lease. Apartments are generally owned by way of long leasehold interests with covenants. You could run into difficulties with both your neighbours and with the Management Company. The Spencer Dock Development has in fact prohibited Airbnb type lettings due to potential anti-social behaviour and, it is likely, this trend will continue to other developments in the city.
- Planning/Use: Planning Authorities zone properties according to their permitted user. If the user of a property is changed materially then a new planning permission may be needed. A recent decision from An Bord Pleanála found that the ‘use’ of a property as an Airb’n’b property constituted a material change of use from residential use to commercial. The advertisement of a sale of the property in Temple Bar quoted an asking price of €425,000 on the basis that it boasted a rental income of €79,000 per annum from short term lettings. An Bord Pleanála found that this constituted a change of use. The practical effect of this is that the owner was in breach of planning legislation and subject to enforcement. There are other implications if your property has commercial use. It would potentially become liable for expensive commercial rates.
- Health & Safety: As a landlord, even of a short term let, Health & Safety Legislation applies to you, with all of the resulting requirements i.e. smoke, Co2 alarms and compliance with the minimum standards set down by the Housing Regulations to name a few.
- Insurance: Due to intensification of the Use or by occupation by anybody other than the insurance holder, you may jeopardise or invalidate any claim which may be taken against the block insurance policy or your individual insurance policy. If you are letting the property or if you have tenants who may be subletting you should notify your insurer.
- Mortgage: You should check the terms of your Mortgage to ensure that it does not contain a specific covenant which provides that the property should not be used as anything other than your dwellinghouse or as a residential property.
- Nuisance: As arose in the Temple Bar case, you should be aware that your neighbours may have rights under nuisance and trespass laws. There are a number of potential options open to neighbours who tire of the noise of wheelie suitcases on cobble stones coming and going at all hours.
Other hazards are the potential for increased insurance claims if you have multiple occupants, as well as additional wear and tear on the property.
These examples may burst the bubble of Airb’n’b being a fool proof way of making an income from your home. This is a non-exhaustive list of the potential pitfalls. For any further advice or assistance please do not hesitate to contact our property department.