A landlord’s guide to Airbnb


Author: Siobhan Doherty


Siobhan Doherty, Associate, Fladgate LLP (sdoherty@fladgate.com)


 

In recent years Airbnb has become increasingly popular with both hosts and guests. It gives hosts an opportunity to let their properties out on a short-term basis and to generate extra income. Guests have an opportunity to “feel at home” and “live like a local” in their chosen location. Airbnb’s popularity centres round the unique accommodation available, its affordability and its degree of flexibility.

Colliers’ 2018 market report suggests that Airbnb’s share in the overnight stay market has increased to 3.4% since 2016, with London being one of the five main European cities using the service. In fact, Colliers report that London is the largest market for overnight Airbnb stays (6,703,337 overnight stays in 2017 – a 45% rise compared to 2016).

However, for landlords whose tenants are using Airbnb the outlook may not be so rosy. Security concerns, the uncertainty as to who is in your property at any one time and the threat of increased nuisance are just some of the obvious reasons why landlords may have reservations about their tenants using Airbnb.

Recent case law has raised doubts over residential leaseholders’ abilities to be hosts and to rent their properties with Airbnb. Although this decision will be seen as a setback by hosts wishing to use Airbnb, it should be welcomed by landlords who are looking to maintain a degree of control over their properties.

Recent case law

In Bermondsey Exchange Freeholders Limited v Ninos Koumetta (As Trustee In Bankruptcy Of Kevin Geoghegan Conway) (Unreported), an appeal judge ruled that an injunction preventing a leaseholder from letting his flat on Airbnb should continue, approving the trial judge’s decision that a leaseholder renting out their spare rooms through Airbnb can amount to a breach of the tenant’s leasehold covenants.

Facts of the case

Mr Conway (Mr C) purchased a 999 year flat in the Bermondsey Exchange Building, South Bermondsey.  Mr C didn’t reside at his property but instead sublet it by way of ASTs. This was until 2015 when he started offering his flat to provide short-term holiday accommodation using Airbnb. The landlord’s management company had concerns about this practice and asked Mr C to refrain from letting his property in this way. Mr C declined. The landlord issued a claim against Mr C, arguing it was in breach of his lease. At trial, the judge held that Mr C was in breach of his lease and ordered an injunction to prevent Mr C from continuing to let his property using Airbnb. Mr C appealed but his appeal was rejected and the injunction upheld.

Terms of the lease

In the case, the judge found that Mr C had breached the following clauses of his lease:

  1. Clause 2.10 which said “not to part with or share possession of the whole of the Demised Premises or permit any company or person to occupy the same save by way of an assignment or underlease of the whole of the Demised Premises”.This clause was breached by Mr C as he had parted with possession of the property and he had allowed others to use his property without having assigned or granted an underlease.
  2. Clause 2.10 which also said “Without prejudice to the absolute prohibitions hereinbefore contained not to assign or underlet the whole of the Demised Premises without the prior written consent of the Landlord”.This was breached by Mr C as no consent was given by the Landlord.
  3. Clause 2.4 which said “Not to use or permit the use of the Demised Premises or any part thereof otherwise than as a residential flat with the occupation of one family only...”This was breached as Mr C was using the property for commercial use and renting through Airbnb meant that the property was not being used as a residential flat.

How can this decision help landlords?

This decision gives a clear indication that renting properties out via Airbnb is likely to amount to a breach of usual common lease covenants.  Landlords who object to such practice will now be able to take a robust stance with leaseholders who are in breach of their covenants and prevent the practice being carried on.

Going forwards

With the Airbnb service set to stay, we would suggest landlords start to consider whether it is appropriate to include lease provisions dealing with Airbnb services in residential (and commercial) leases. Having specific clauses in a lease governing the use of Airbnb will prevent disputes arising in the future. Landlords should also consider whether their tenant will need any specific licence (i.e. a premises licence) and whether renting a property for short-term letting complies with local planning law. In some areas a short-term let may be considered as a material change of use (i.e. a change of use from residential use without planning consent).  The lease should make it clear what licences and permits are needed by the tenant and oblige the tenant to procure these.

For further information please get in touch with a member of the Fladgate LLP real estate department.

View by date:


View by author: