short term lets

There have been a number of issues in recent years concerning the use of short term lets (such as Air B’n’B) in leasehold properties.

The question has arisen as to whether such lettings, which tend to be of a holiday or temporary nature, breach the covenant to use as a private residence or dwelling house.

It was thought that an answer was provided by the Upper Tier of the Property Tribunal (UT) in the case of Nemcova v Fairfield Rents, which had been decided in 2016, and found that such use was a breach of covenant. However, the First Tier of the Property Tribunal departed from that decision in the matter of Triplerose v Beattie. Perhaps unsurprisingly, that case was referred to the UT. The UT has now given its decision ([2020] UKUT 180(LC)).

The UT’s finding was that such short-term occupation by paying guests has always been a breach of a private residence covenant. It also concluded that the covenant having two sections, the prohibition of business and requirement to use as a private dwelling house, did not detract from this finding as one limb was not subordinate to the other. Both must be given effect to, and noting that such dual part clauses were a common method of drafting.

This case did not find other forms of subletting, for example the granting of an assured shorthold tenancy, were prevented as this would not have breached the “dwelling house” covenant and were specifically permitted in the lease. There was also no covenant that the property must be the leaseholder’s private residence, merely a private residence.

One might however speculate as to whether there will be litigation in the future as regards those leases which permit assured shorthold tenancies limited to a period of six months, should S21 be abolished as the government has stated its intention to do.

The UT also gave attention to the requirement in the lease to not use the property for any trade or business. The UT concluded that short term lets for residential use did not amount to a breach of the “business” limb of the covenant as such matters as changing laundry and providing breakfast did not amount to a business.

Any leaseholders considering short term lets are advised to check the terms of their leases carefully, as should freeholders and management companies/agents, if properties for which they are responsible are being use for such lettings.