Airbnb is becoming increasingly popular across the globe as an alternative to traditional holiday accommodation. In fact, Airbnb has gone beyond just a ‘holiday home’ arrangement. People are using sublet homes for entertaining and to host social events, and professionals are using them as a place to stay during the week to avoid long daily commutes into work. It is big business, with potential for property owners (or ‘hosts’ as Airbnb likes to call them) to earn a sizeable income by subletting their properties in this way.
The popularity of short term rental websites such as Airbnb was boosted further in April’s budget, when Chancellor George Osborne gave a £1,000.00 tax break for people who make money out of property trading. Nevertheless, a side-line rental business may in fact lead to serious repercussions to you and your home should you not take certain steps before embarking on a sublet.
Properties with a mortgage
Most home owners have a mortgage on their property and, before subletting their property on sites such as Airbnb, do not read the terms in their mortgage which would usually require the lender’s consent before the property can be sublet. If home owners invalidate the terms of their mortgage, in a worst case scenario a lender could ask for a full repayment.
If you are a leaseholder and are considering subletting via AirBnb, please ensure you check your lease first. There will usually be a clause which will prevent subletting. This has been emphasised in a recent case of Nemcova v Fairfield Rents Limited, more affectionately known as the ‘Airbnb ruling’. In this case, there was nothing in the lease the expressly prohibited subletting, however there was a clause that required the leasholder “Not to use the [property] … other than as a private residence”. Ms Nemcova argued that irrespective of the short term nature of each subletting via Airbnb, her subtenants were using the property as a private residence in accordance with the lease. The Court disagreed – holding that in order for a property to be used as the occupier’s private residence, there must be a “degree of permanence” going beyond being there for a weekend or a few nights in the week. Therefore, the occupiers of the Airbnb style short-term lettings could not be said to have occupied the property as a private residence. Whilst this case was decided on its own specific facts, it is still something for landlords and leaseholders to be aware of. For this reason you should always check your lease before embarking on a sublet. Breaching the terms of your lease can have serious consequences, which can include forfeiture of the lease itself.
If you are a Freeholder and you believe your Leaseholder has breached the terms within their lease, you may have the right to end their leasehold interest. You should immediately seek advice about your options. According to the Guardian, over a quarter of London homes were listed on Airbnb last year for more than 90 days, many illegally, and 23% of the total 4,938 of Airbnb’s “entire home” London listings were let out for three months or more – despite the fact the law states that anybody doing so should apply for planning permission. The purpose of the law is to stop landlords turning badly needed housing into unofficial hotels. It is important that landlords who wish to rent out their property for long durations ensure they have applied for planning permission for a change of use to the property.
We do not recommend going ahead with subletting without seeking legal advice, as this could lead to major penalties and consequences in the future.
Gelbergs’ experienced property team can:
· Advise on the planning permission you will need and contact the relevant parties for consent to the change of use;
· Review the terms of your lease, request amendments to the lease and ask your landlord for consent regarding subletting;
· Write to your mortgage lender to check the lending criteria on your mortgage with regards to subletting;
· Ensure that correct steps are taken to prevent you being fined or prosecuted for subletting unlawfully.
Remember, always take legal advice for your particular circumstances and needs.
If you have any questions about subletting or need any advice relating to a property matter, please contact Partner and Head of Property Law, Russell Shapiro on 0207 226 0570 or email firstname.lastname@example.org