As the presence of AirBnB and other similar short term letting agencies continue to grow rapidly across the country and specifically in London, we are being asked this question on a very regular basis. So, can the owner of a flat let it on short term agreements throughout the year without being in breach of their lease? The answer to that question is “probably not” but each case will turn on the specific provisions within the lease of the property and the factual circumstances of the letting.

The Problems

Some leases will contain provisions imposing specific restrictions and conditions upon any sub-letting, parting with or sharing possession, be that of the whole flat or a room within the flat, short term or long term. Some leases will have no, minimal or more relaxed restrictions on sub-letting.

Most leases will contain a specific restriction on how the flat can be used by those in occupation (known as the ‘user covenant’), but some will have little in that regard.

The Law

There have been two recent decisions that go some way to explaining how the courts are likely to approach this issue.

The first is the decision of Nemcova v Fairfield Rents Limited, a claim settled in 2016 and one that has been well publicised since. The second is a far more recent decision, from May of this year, of Bermondsey Exchange Freeholders Limited v Ninos Koumetto (Trustee for the leaseholder who, by the time of the decision, was bankrupt) settling an Appeal against the initial decision late last year.

The Nemcova decision highlighted to landlords that they should be alive to the possibility of preventing AirBnB type lettings by reference to, not only to the sub-letting restrictions but also, the user covenant within their leases.

Ms Nemcova’s lease contained no restriction on sub-letting specifically, so that route was not available to the landlord. It did, however, contain the following covenant in respect of how the flat could be used:-

Not to use the Demised Premises or permit them to be used for any illegal or immoral purpose or for any purpose whatsoever other than as a private residence.

The earlier decision of the First Tier Tribunal (‘FTT’) was appealed to the Upper Tribunal, who agreed with the FTT and found that Ms Nemcova was in breach of covenant in allowing the property to be let on a short term let basis. The Tribunal held, by reference to the user covenant above, that in order for a property to be used as the occupier’s private residence, there must be a degree of permanence going beyond being there for a weekend or a few nights in the week. The Airbnb guests of the flat could not sensibly argue that they occupied the premises as their “private residence” as staying in the property for just a weekend, or a few nights, was “too transient”.

Accordingly, the Tribunal found that the nature of the occupation must be in breach of the specific user covenant affecting this property.

The very recent decision of Bermondsey Exchange Freeholders Limited related to an injunction initially made last year preventing the lessee from continuing to let his property on AirBnB or similar type short lets.

In this case the lease did contain requirement for the lessee to comply with sub-letting formalities, such as obtaining consent of the landlord, and with which the tenant had failed to comply. In addition the user covenant restricted the use of the flat to “a residential flat within the occupation of one family only”.

The Court confirmed that both the lack of compliance with the sub-letting formalities in the lease and the nature of the user covenant meant that the letting of the flat, and the type of lettings agreed, both amounted to breaches of the lease. Accordingly, the landlord was entitled to the injunction prohibiting further lettings of the flat.

Summary

The points to draw from these two decisions are straight forward:-

• Check the lease before you act;

• If, as a leaseholder, you wish to let your flat on any basis, short term or long term, you must first check the lease terms to see what is required of you and whether any of the lease terms would prevent you from letting in the manner you propose BEFORE you take that step;

• Any landlords, RMC’s or RTM companies of developments where lessees are, or might be, sub-letting on a short or long term basis would do well to review carefully the lease provisions and, where restrictions apply, inform leaseholders of those restrictions so as to avoid the need for litigation.

In addition to the above, it is also the case that even where a lease does not restrict short term lettings it may be that that use of the flat as an AirBnB type venue will fall foul of local authority planning restrictions, particularly in Central London. Whilst action based on this ground alone should only be pursued if there really is nothing better to rely upon (local authority budgets tend not to favour such actions), and there is a real need to prevent further lettings, it is something to raise with any defaulting leaseholder as encouragement for them to desist. Breaches of planning restrictions may also give rise to breaches of the lease in their own right, depending on the terms of the lease in question.

For more information, please contact Kevin Lever at Kevin.Lever@kdllaw.com or on 01435 897297.

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