Airbnb: don't breach your covenant

In the current economic climate, investors, landlords and those looking to make extra income from their property may be considering their options and wondering how their property can work more effectively for them. Some may also have considered whether letting on a short-term holiday / weekend let basis with such websites as Airbnb, Virbo and Booking.com is the way to go (other sites are available!).

If you have been toying with this idea, beware of the consequences that may follow! You need to ensure that legally you can use the property in the way you are planning to and, for those with a leasehold property, you need to make sure that such plans won’t breach any covenants relating to the property. With that in mind, maybe now is a good time to remember the case of Triplerose Ltd v Beattie [2020].

Here, a couple, who had originally lived in the flat as their primary residence, decided after a change in personal circumstances to let out the property for part of the week while they weren’t staying there. They employed a company who arranged for the property to be advertised on "Airbnb" and "Booking.com" websites as serviced accommodation available for short-term occupation. This company handled check-ins and check-outs and arranged laundry services for guests.

The couple’s own lease contained a covenant:

Not at any time to carry on or permit to be carried on upon the Property any trade or business whatsoever nor to use or permit the same to be used for any purpose other than as a private dwelling house for occupation by one family at any one time.

Their landlord however argued that the couple’s actions had breached the lease in two ways. Firstly, they were not using the property as a private dwelling house; and secondly they were carrying out a business.

Although unsuccessful in the first instance, the landlord appealed the initial decision.

In deciding whether the couple were using the property as a private dwelling house or not, The Upper Tribunal (Lands Chamber) looked at whether the flat was being used for any purpose other than as a private dwelling for occupation by one family at any one time. This is not an easy question to answer, and many factors need to be considered including:

• The degree of permanence of occupation
• The relationship between the occupants
• Whether there was payment for the occupation
• Whether the owner was present or not at the time

They concluded the couple had breached the lease.

As to whether the couple were using the property for trade and business, The Upper Tribunal (Lands Chamber) didn’t agree with the landlord, as it felt there was a distinction between using premises as a business resource and carrying on a business upon the premises. The devil, as ever, is in the detail. Although the couple were using the flat for the business of short-term letting, no business activity was being carried on "upon" the property. Therefore, no breach!

The key point to take from this is that those thinking of renting out their property as a short-term holiday / weekend let need to ensure they read their title documents carefully as such letting arrangements will be in breach of a private dwelling house covenant.

Those with mortgages should take extra care, as without the consent of their lender, even on a buy to let mortgage, they could also find themselves in breach of their mortgage conditions.