Articles from the Silver Shemmings Ash Team on contractual matters, recent case law changes and items of interest in the construction and property world

Are you sure you can let your property on Airbnb? by Maurice Esterkin

July 17, 2018 | Silver Shemmings

When purchasing or lending against a leasehold property, buyers and lenders need to ensure that their lease permits short term lettings.  This is particularly crucial where a buyer intends to use the property as an Airbnb, an increasingly popular means of short-term letting.

Clauses within the lease specifically excluding short-term lettings are uncommon and buyers must ensure that the user clause cannot be interpreted so as to prevent them from letting their property as a holiday let on Airbnb.

Recent cases have debated whether letting a property on Airbnb would breach the terms of a lease containing clauses which restrict the use of property as a private residence only and clauses prohibiting carrying out any business at the property.  With regard to residential leases containing either or both of these clauses, one might mistakenly assume that letting a property for residential use, albeit for a day or two, in some cases weeks, would not be a breach.

One such example is the recent case of Nemcova v Fairfield Rents Ltd UKUT 303 (LC). The lease in this case stated that the leaseholder was “not to use the premises… for any other purpose whatsoever otherwise than as private residence.” At first glance, one might assume that this clause could be interpreted so as not to use the property other than as a private dwellinghouse, which is often how the user clause is worded in residential leases.  In Nemcova however, the Upper Tribunal held that the clause prohibited all other uses save as a private residence. The clause does not relate only to use by the owner or the occupier, but its use in general and in this case the judge said that there must be a degree of permanence going beyond being there for a weekend or a few nights in the week. The lessee in granting short term lettings for days and weeks rather than months had breached the clause in the lease to use the property as a private residence only. What is important therefore is the duration of the letting.

Evidently, it is not as clear cut as thinking that because one’s lease does not contain the same wording as in Nemcova that one can simply let their leasehold property on Airbnb.  There could be more case law to follow as Airbnb continues to boom and one needs to consider their own lease carefully.

As well as reviewing the wording of the user clause in the lease to check whether Airbnb lets are not excluded, owners who have mortgaged their property also need to check the terms of their mortgage and ensure that by letting their property as a holiday let on Airbnb they do not breach the terms of their mortgage.

Part 1 of the Council of Mortgage Lenders handbook, at note 16.4, states that the lender should advise the borrower that consent is to be obtained if the borrower wishes to sublet the property after completion. Note 16.4.3 states that the lender reserves the right to change the terms of the mortgage, or requires a higher rate of interest if the borrower decides to consider the request for consent.

It is usually a term of the mortgage that interest rates are available for as long as the owner occupies the property as their only or main residence. Any letting may require consent in writing from the mortgage lender, and failing to do so may lead to a demand for repayment in full or repossession of the property.

Author Maurice Esterkin predominantly acts for secured lenders and developers and has particular expertise with development finance and he has experience in all fields of property including commercial property, residential development and enfranchisement. Maurice has a construction engineering degree and had a former career in the procurement and management of commercial construction projects, granting him his practical approach.  He is renowned by clients for his natural problem solving abilities

At Silver Shemmings Ash, we provide seminars and training alongside our core activities in contentious and non-contentious matters, the purpose if these is to facilitate a greater knowledge and understanding of construction and property law. There remains a considered lack of training in such areas for companies and one to which we look to address

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