The online, short term lettings marketplace, Airbnb, was recently the topic of litigation in which a host was found to be in breach of her lease.

In Nemcova v Fairfield Rents Ltd [2016] UKUT 303 (LC), the Upper Tribunal gave guidance on the circumstances in which Airbnb style, short-term lettings might amount to a breach of covenant, prohibiting the use of a property for anything other than ‘a private residence’.

The tenant, Ms Nemcova, was the leaseholder of a residential flat for a term of 99 years. Her lease included standard user covenants, including:

“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.”

Nemcova only occupied the property for 75% of the year but the flat was being occupied by a series of short-term Airbnb guests. After numerous complaints from other tenants in the block of flats, the landlord, Fairfield Rents Ltd, issued an application for a breach of covenant.

It was Nemcova’s argument that, as she paid all bills in respect of the flat, it always remained her main residence. She claimed that the lease did not prohibit any sub-letting and argued that, as long as the flat retained its use as a private residence, there was no difference between a short term let and an assured shorthold tenancy.

Judgment

It was held that the lease did not have any restrictions on underletting, assigning or parting with possession of the whole of the flat. However, the covenant did require that there should be a clear connection between the occupier and the residence. The duration of occupation was material and there must be “a degree of permanence going beyond being there for a weekend or a few nights in the week”.

The Upper Tribunal therefore held that the granting of these short term lettings was a breach of the user covenant.

Comment

This strict interpretation of the lease is an important decision for residential property owners and freeholders to be mindful at a time when people are increasingly letting their properties on a short term basis to earn additional income.

The Nemcova decision is a stark reminder to leaseholders to review their leases carefully before offering lettings on Airbnb style platforms for any covenants prohibiting them from using their properties in this way. If breach of covenant is established, this could be the prelude to the landlord obtaining possession of the property if it so wished.

Even if the lease or tenancy agreement does not prohibit Airbnb lettings, the mortgage terms may well do so. Unless a leaseholder has a “buy-to-let” mortgage it is likely that the terms will prohibit subletting without consent. Tenants should also give consideration to whether letting on Airbnb requires additional insurance, as well as the tax implications of letting.

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