The rise and risks of AirBnB
AirBnB and other similar platforms have made it easier than ever to earn additional income by letting out whole properties (or spare rooms) on short term arrangements. This is particularly common here in the South West, a popular destination for tourists looking for a short-term base. At the time of writing this article, there were some 21 listings in the small market town in which I live.
However, a case heard by the Upper Tribunal in 2016 highlights a potential risk that can arise where the property is held on a leasehold basis. The implications of this case are still being discussed as, for some, it could ultimately lead to losing the property altogether.
In Nemcova v Fairfield, the Upper Tribunal considered whether short term lets breached a lease covenant which prohibited using the property for any purpose other than a private residence.
Very briefly, Ms Nemcova had a flat within a block which was held on a 99 year lease. This contained a covenant “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.” There were no relevant restrictions concerning subletting the flat.
Over time, Ms Nemcova entered into a number of short lettings. This caused annoyance to neighbouring occupiers who then complained to the landlord, Fairfield Rents Ltd. The landlord applied to the First Tier Tribunal for a determination that Ms Nemcova had breached the private residence covenant mentioned above. This was/is important as this represents the first stage in the forfeiture process (which can ultimately result in termination of a lease). The Tribunal agreed concluded that she was in breach.
The issue was subsequently considered on an appeal to the Upper Tribunal who, unfortunately for Ms Nemcova, came to the same conclusion. The Upper Tribunal was keen to stress that each case is fact specific and will depend upon its own facts and the particular wording of the lease in question. However, the covenants in this case were not particularly unusual or uncommon.
So, the simple lesson is that if you are thinking about letting out your flat (or other leasehold property) on short term arrangements, carefully consider the terms of your lease and, if in any doubt, seek advice.