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Bed & Breakfast: Not If You’re A Leaseholder!

The growth of Airbnb and other similar online marketplaces has seen a huge rise in the number of leasehold property owners renting out their rooms, and homes, as an alternative option to staying in a hotel.

However, are short-term lettings of this nature putting leaseholders in breach of their Lease?

This was the issue which the Upper Tribunal (Lands Chamber) had to decide in the Case of Nemcova v Fairfield Rents Limited.

The Case

Miss Nemcova had a 99 year Lease of a flat in Enfield. She was frequently absent and granted a series of short-term lettings of the flat, usually to business visitors to London; she estimated that it was let for about 90 days in the year.

The Lease didn’t require Miss Nemcova to occupy the flat as her only, or main, residence and it didn’t prohibit the use of the flat for business, short-term lettings, occupational licence or holiday lets.

However, the Lease did contain a covenant that Miss Nemcova wasn’t to use the property “for any illegal or immoral purpose or for any purpose whatsoever other than as a private residence”.

Following complaints by the other residents of the block, the Landlord took action and claimed that as the short-term lettings didn’t constitute use of the flat as a “private residence”, Miss Nemcova was acting in breach of her obligations under the Lease.

The Upper Tribunal found that the occupation of the flat by each of the short-term tenants lacked sufficient permanency for it to be considered occupation of the flat “as a private residence”.

Each of the short-term occupiers had their own private residence, which they had left to occupy the flat temporarily for a specific short-term purpose (in the same way as they would occupy a hotel room). Their occupation was therefore of a transient nature.

Therefore the Upper Tribunal found that Miss Nemcova was acting in breach of the covenant in her Lease.

Summary

Although this case is fact sensitive, most Leases will contain similar clauses relating to the use of the property. Whether a leaseholder is in breach of their Lease if they let their property on this type of short-term basis will depend upon the construction of the particular covenant in the Lease.

If you are a leaseholder and are considering short-term Airbnb style sublets, you should carefully review your Lease to ascertain whether there are any restrictions on its use, and seek legal advice where necessary.

Otherwise you may be acting in breach of the terms of your Lease and your Landlord could take legal action against you; which could ultimately result in your Lease being forfeited.

 

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Luke Patel

Partner and Head of Dispute Resolution
Commercial Dispute Resolution
LPatel@LawBlacks.com
0113 227 9316
@LukeLawBlacks
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Luke Patel Blacks Solicitors LLP