The other side of Airbnb

AirBnB describes itself as a trusted community marketplace that allows ‘landlords’ to offer accommodation for short-term stays. It can apparently connect users to 2 million properties in 34,000 cities across 191 countries, and is well placed to improve mobility among those seeking accommodation, while allowing those with extra space to monetise it. It is surely a good thing. However, those seeking to offer their property on AirBnB (and other short-term stay services) should be aware of the risks.

What those risks are depends firstly on the landlord’s tenure. More often than not, the landlord will be a long lessee or a tenant in their own right. Before advertising a property on AirBnB, they should check their lease or tenancy agreement for any limitation. Most leases contain user covenants prohibiting one or all of the following:

• The subletting of part or all of the property (without consent);

• Use other than as a private residence in the occupation of a single family; and

• Use for business purposes.

In addition, they may contain covenants against:

• Causing (or allowing) a nuisance or annoyance; and

• Vitiating any insurance policy.

Breach of covenant

The First-Tier Tribunal (FTT) is the body most likely to determine whether offering short-term stays amounts to a breach of covenant. Its judgments are not binding but, as a matter of judicial comity, persuasive.

It has held that short-term stays do not breach subletting covenants because they are akin to licences, not leases (Sarum Properties Ltd v Jones BIR/00CW/LBC/2014/0006); they breach the covenant for private residential use (Aziz v 6 Cromwell Gardens (Freehold) Company LON/00AW/LSC/2015/0292); there may be a nuisance where noise is caused by the frequent footfall of (short-term) guests (Laxcon Developments Ltd v St John Guy Rogers LON/00AY/LBC/2015/0021); and there will be a breach of the insurance covenant where it is in fact vitiated (20 Nottingham Place ManCo Ltd v Cooper LON/00BK/LBC/2016/0020).

More recently, the Upper Tribunal, whose judgments are binding, held in Nemocova v Fairfield Rents Ltd [2016] UKUT 303 (LC) that in granting a series of short-term stays the leaseholder was in breach of the covenant to use the property only as ‘a private residence’. It further held that days or weeks in occupation of a property, whether by the landlord or their licensees, are unlikely to suffice in establishing private residential use.

A lessee who is found to be in breach of covenant risks a claim for damages and/or forfeiture proceedings. They may lose their property and should be alive to that very real risk.

Secure and assured tenants face additional risks. Although the FTT considers that short-term stays do not amount to subletting, there may be circumstances in which the Crown Court or County Court concludes otherwise.

Any such tenant who, knowing it to be a breach of their tenancy agreement (or acting dishonestly), inter alia sublets their property and ceases to occupy it as their only or principal home commits a crime for which they are liable to two years’ imprisonment and/or an unlimited fine under sections 1 and 2 of the Prevention of Social Housing Fraud Act 2013. Under section 4 of the Act, they may also be subject to an unlawful profit order.

The risk is not substantial in AirBnB-type cases because the property will invariably have been licensed, not sublet. It will be easier to prove, though, that the property is no longer being occupied as the tenant’s only or principal home, in which case they will lose security of tenure and may have their tenancy terminated by notice to quit (under section 79 of the Housing Act 1985 and section 1 of the Housing Act 1988).

Requirements for landlords

All lessee- and tenant-landlords must accustom themselves to their new status. Their licensees are unlikely to occupy the property as their only or principal home, so a mandatory licence to rent out the property as a house in multiple occupation is not required under section 254 of the Housing Act 2004, and there is no need to consider the right to rent, pursuant to section 22 of the Immigration Act 2014.

They will not be assured shorthold tenants so that the deposit protection requirements will not apply under section 213 of the 2004 Act. Landlords may, though, require an additional or selective licence (sections 56 and 79), and if they do, failure to apply will render them liable to an unlimited fine (sections 72 and 95).

In addition, they will likely need a gas safety certificate (Gas Safety (Installation and Use) Regulations 1998/2451), smoke and carbon monoxide alarms (Smoke and Carbon Monoxide Alarm (England) Regulations 2015/1693), and an energy performance certificate (Energy Performance of Buildings (England and Wales) Regulations 2012/3118).

Landlords in London without permission to use their property as temporary sleeping accommodation will breach planning control if, broadly, anyone pays to sleep in it for fewer than 90 days per year, pursuant to section 44 of the Deregulation Act 2015. Local authorities are empowered to serve enforcement notices on such landlords, with which failure to comply is a crime punishable by a £20,000 fine under section 179 of the Town and Country Planning Act 1990.

Many with a spare room (or flat) are drawn to AirBnB. Before advertising it, though, they should consider the various risks. The consequences of failing to do so may be dire.

Riccardo Calzavara is a barrister at Arden Chambers

@ArdenChambers

www.ardenchambers.com