Having recently recorded its 500 millionth guest arrival, Airbnb has become a global phenomenon. However, like other tech start-ups that experience substantial and accelerated growth, the law often struggles to keep pace.
Airbnb allows people to let their properties or spare rooms to guests, becoming instant landlords for, often, short-term and transient stays of one to two days.
The 2018 Airbnb UK Insights Report explains that the East of England (including Norwich and Cambridge) welcomed 344,000 guests over the year ending 1 July 2018 and that there were 10,800 active listings.
Airbnb offer articles on their website about what legal and regulatory issues someone should consider before hosting on Airbnb and responsible hosting in the UK. Hosts are directed to check with a lawyer or local authority to learn more about regulations, restrictions, obligations, contracts, laws, and community rules that may affect their ability to host.
The potential consequences of not checking the terms of a lease before granting short-term tenancies can be wide ranging. Some of the key parts of the lease to take advice on are:
User Covenants
Many residential long leases will likely contain a 'user' covenant stating for what purpose the tenant may use the property. Often, this could be something akin to a restriction not to use the property for anything other than 'residential' use, a 'single private dwelling' or similar.
Depending on the wording of the user covenant, the nature of some Airbnb lets, to be short-term, temporary arrangements akin to a commercial hire nature, could be a breach of the covenant.
In the case of Nemcova v Fairfield Rents Ltd [2016] the duration of occupation was held to be material to the question of residence and for short term lets the occupier would not consider the property as being their private residence. The Upper Tribunal stressed however, that each case would depend upon the construction of the covenant and the facts of the case. This highlights the importance to take advice on the terms of the lease.
Restrictions on Underletting
Residential leases often contain restrictions on underletting the property. Whether this is an absolute restriction, i.e. not to underlet part of the premises, or whether this is a fully qualified restriction, i.e. not to underlet the whole of the premises without the landlord's permission (such permission not to be unreasonably withheld).
Several issues with this arise when applied to Airbnb lets. Firstly, permission cannot be unreasonably withheld if it is not sought from the Landlord in the first instance. The first step then should be to obtain permission from the Landlord. If the restriction requires consent and this has not been sought then a tenant will be in breach of their lease.
If permission is granted, then such permission would likely only be given in relation to the individual let that it relates to, rather than being a blanket permission to underlet. This can be impractical and onerous on the landlord when the underlease is only for one or two nights for each let and becomes more so if the restriction is drafted so that 'written' permission is required. Understandably, a Landlord would be put to significant administrative burden responding to each request. Should other tenants in the building be tempted by the opportunities of Airbnb, then this burden could become unmanageable.
This was the subject of litigation in the case of Bermondsey Exchange Freeholders Limited v Nino Koumetto (1 May 2018). In this case, the defendant held a 999 year lease of a flat in a development where many of the flats were sub-let to residential tenants on short tenancies of 6 months. The Judge in the first instance found that there had been an underletting by the tenant through short-term Airbnb lettings and no consent had been sought.
In the absence of any clarity from statute or other regulations regarding Airbnb and other short-term lettings websites, the focus when approaching the legality is on the terms of the tenants lease and whether the tenant will be in breach.
Other considerations
- Mortgages
A tenant with a mortgage over the property may also find themselves in breach of their mortgage terms. Such terms often prohibit underletting without consent and being in breach of the lease. If the mortgage is in breach, the mortgagee may be entitled to call in the security of the mortgage.
- Insurance
Insurance coverage should also be checked to ensure that any let does not invalidate an insurance policy that is in force, and checked to ensure that the coverage in place is sufficient.
- Nuisance
A Lease may also contain various covenants against causing a 'nuisance' to neighbouring tenants. A tenant may have little control over enforcing this covenant when letting out the whole of their property to strangers.
- Planning Permission
In London, if you are considering letting for less than 90 consecutive nights, but the cumulative total exceeds 90 nights in a calendar year, then Planning Permission is required to change the use to 'temporary sleeping accommodation'.
- Tax
Money earnt on Airbnb is taxable income and may attract income tax, business rates, corporation tax, or VAT. Advice should be sought from a tax professional.
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*This article is provided for general information purposes only and does not constitute legal advice or other professional advice.
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