An End to Airbnb & Holiday Lets at the Grand and Elsewhere?

In what might be a body blow to those people who rent out their own flats as holiday lets,such Mr & Mrs Stainer licensee’s of  the-grand  the highest property court in the land has issued a clear warning. In brief, their judgement means that people who rent out their leasehold property as holiday lets airbnb etc, are potentially breaching their leases, and could be in danger of losing their properties.

In the case of Nemcova v Fairfield Rents Ltd [2016] UKUT 303 (LC , the Upper Tribunal decided that a short term letting would constitute a breach of the covenant prohibiting use of the property other than as a private residence. This judgement is a clear and binding authority that a lease covenant to only use a property as ‘a private residence’ is breached by short term, holiday, or Airbnb style letting. 

The key question the court considered was whether a temporary occupation of an entire property is consistent with the definition of the property as “a private residence” – and ruled it was not.

The judge’s finding is binding on lower courts and tribunals.

Other common lease clauses may restrict occupation of the property to a single family, or prohibit use in a way that causes nuisance or annoyance to the occupiers of other flats. Some leases may even allow neighbours in your building to enforce lease clauses without involving the freeholder.

Mortgage Beware!

Restrictions in the lease are not the only minefield. The Council of Mortgage Lenders is very clear — any form of sub-letting without seeking permission from their mortgage lender are “very likely” to be breaking their mortgage contract. If your lender discovers your property is being occupied by holiday lets, it could call in the mortgage. An added danger is if your guests repeatedly cause a statutory nuisance to neighbours, you could be served with an abatement order and penalised by your local authority.

Most sensible freeholders ban subletting on a short-term basis in their tenancy agreements.  But what if your landlord is Hallam Estates, the vehicle through which Michael Stainer is a Director of the Grand, where he and his wife own 17 such flats? What if some of these flats are clearly used for commercial activities and are advertised as such  . We have seen a website from a third party organisation which states: “The hotel [sic] consists of several large apartments. Our classroom, dining room and entertainment area is on the third and fourth floor”. 

We bet the residents who adjoin these apartments are happy to find catering activities being carried out next door.  We wonder what the insurers would say.  What does the Council have to say at this blatant breach of planning?

Anyone doing Airbnb, holdiday lettings etc in a leasehold flat should immediately check their lease covenants, because if the freeholder/head lessor decides to take action for a finding of breach of lease on that clause, this is a clear precedent that such a use would certainly be a breach.

Finally, it means that the 17 flats are now all eligible for full council tax, even if they are empty, we wonder if Mr & Mrs Stainer have the necessary monies to pay 17 sets of council tax?

Shepwayvox