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British people were told by Matt Hancock this week that it is still “too early” to book a summer holiday abroad. As a result, many of us will be looking closer to home for our vacations this year. If you have a property which you think may appeal to the masses, then you may be considering advertising it as a short-term let to generate additional income. This article looks at some of the legal issues that you may wish to consider before letting out your property.
Can I rent my leasehold property out?
If you own your property leasehold, the lease will govern the terms under which you are allowed to sublet.
Specifically, you will be looking for a clause which refers to “alienation” or “parting with possession”. This may contain restrictions on the type or length of the permitted letting and/or impose a requirement to obtain the freeholder/landlord’s approval.
In Bermondsey Exchange Freeholders Limited v Kevin Conway, a management company brought a case against a leaseholder for renting his flat out on Airbnb. The Court found that by using the flat for short-term lets, the leaseholder was in breach of all three of the following terms in his lease:
- Not to use or permit the use of the Premises or any part thereof otherwise than as a residential flat with the occupation of one family only.
- Not to part with or share possession of the whole of the Premises or permit any company or person to occupy the same save by way of an assignment or underlease of the whole of the Premises.
- Without prejudice to the absolute prohibitions hereinbefore contained not to assign or underlet the whole of the Premises without the prior written consent of the Landlord such consent not to be unreasonably withheld.
Watch out for a clause limiting the use of the property to a “private residence”. In the case of Nemcova v Fairfield Rents UKUT 303 (LC) the Tribunal determined that to use a property as a “private residence” required its occupation to have a degree of permanence “going beyond being there for a weekend or a few nights in the week”, and so the leaseholder was prevented from using it as a short-term let.
There are several other clauses to be aware of if you are renting out your leasehold property, such as whether animals are permitted and requirements as to noise levels. In Laxcon Developments Ltd v St John Guy Rodgers, the property owner was held to be responsible for the noise made by his Airbnb guests.
What if I own my property freehold?
It would be sensible to review your title documents to check that there are no restrictions on the title register, which may impact upon your plans. If you find something of concern, remember that not all restrictive covenants are enforceable and you can obtain insurance for the vast majority (as long as you don’t alert the benefitting party to the existence of the covenant). The impact of a restrictive covenant is determined by the specific wording, and so where there is any doubt, it would be best to take legal advice.
Do I need to be aware of anything else?
Regardless of whether you own your property freehold or leasehold, other factors to consider include whether the terms of your mortgage and/or home insurance policy permit short-term letting. Usually mortgage companies will require you to obtain consent from them to sublet the mortgaged property and lenders may reserve the right to change the terms of the mortgage should consent be granted for subletting.
You’ll also need to consider the rules regarding health and safety. This includes the regulations for gas and electrical safety, fire hazards and fire resistant furniture, carbon monoxide alarms, and any legislation relating to a specific feature of your letting, such as a swimming pool.
Not to be overlooked, is your neighbours. Disputes between neighbours can be nasty and expensive and so it is worth considering how your guests may affect your neighbours’ enjoyment of their properties and if there are any steps you could take to mitigate or pre-empt any issues.
This article relates to short-term holiday lets (not exceeding a continuous stay of 31 days), and which are excluded from the Housing Act 1988. If you would like any advice on letting your property or interpreting the terms of your lease, then please contact the Property Litigation team.
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