13 December 2022 by Aysel Ibrahim

Airbnb pitfalls for leaseholders

There is no doubt that Airbnb has increased in popularity over the past few years. Providing the ability to become host to short-term holiday guests at a click of a button, platforms such as Airbnb have become a fruitful venture for many landlords. As seamless as the process can be, the opportunities which Airbnb offers can create pitfalls for UK leaseholders. Leasehold properties in the UK are subject to restrictions, and wider reaching regulatory controls, which can cause headaches if not observed correctly.

The Lease

The first point of call for any leaseholder thinking of a short-term let would be to check the terms of their lease. There are various clauses at play within a lease which may hinder the property becoming a short-term holiday let.

Restrictions on short term lets – many leases contain restrictive covenants which prevent the letting of the leasehold property on a short-term basis. A leaseholder may not be able to let their property without the prior consent of their landlord or, in some cases, there may be an absolute restriction on the letting of the property.

Use of the property – most leases contain clauses which restrict the use of the property to only allow the leaseholder to use it as a private residence. Such restrictions would prevent the property from being used to carry out business. The courts have ruled that the letting of a property via Airbnb on a short-term let would be in breach of such a clause in the lease (Nemcova v Fairfield Rents).

Noise/Nuisance – most leases are likely to include a clause which would prohibit the leaseholder from doing anything which would cause nuisance or disturbance to neighbouring properties. Short-term letting would give rise to increased activity, with guests are entering and leaving the property more frequently and at different times of the day – often late at night or very early in the morning. These activities may cause disturbance to neighbours in breach of the terms of the lease.

Insurance – with leasehold properties, the freeholder is usually under an obligation to maintain the buildings’ insurance. Most buildings’ insurance policies however do not cover short-term lets. If damage is caused to the property or neighbouring property whilst the property is being let, this may not be covered by the insurance. It is important to ensure that, by letting the property on Airbnb, the leaseholder does not invalidate the buildings’ insurance.

Mortgage lenders

Where the leaseholder is expected to be in occupation of the property, then it is likely that the leaseholder’s mortgage lender will not allow for the property to be let without their prior consent. It is important for leaseholders to carefully consider the position before seeking to obtain this consent, as some lenders reserve the right to change the terms of the existing mortgage or increase their interest rate. Such a change to the mortgage product may increase monthly repayments to the lender. This may not be worth changing if the leaseholder is only considering the occasional seasonal let of the property. Also, letting the property without first obtaining the lender’s consent can be a breach of mortgage conditions with serious and significant consequences, such as being asked for full repayment of the loan or repossession of the property.

Planning laws

Local authorities may have issued planning conditions which prohibit the use of the property as an Airbnb let, without first obtaining planning permission or a licence. Listing the property as an Airbnb holiday let may constitute a change from existing residential use to an alternative use, such as commercial use, which may require prior consent or licence. These laws may open the owner up to possible enforcement action which can result in the issue of large fines and an order to reinstate the residential use of the property. It is therefore important to first check to see if such restrictions apply before listing the property.

Letting a leasehold property via Airbnb is not just a question of preparing the listing! Very often, leasehold properties are caught by the restrictions discussed above and it is important to check the lease and wider local rules to ensure that they are not caught by restrictions.

For further information please speak to Aysel Ibrahim or another member of our Residential Real Estate team.

7 December 2022 by Amira Dabbous

How to excel with office space

In a post-pandemic world, a flexible workspace is becoming the default modern office working environment. Landlords often enter into a […]

13 December 2022 by Susanna Spencer

Work Christmas parties – what employers should watch out for?

In the aftermath of Covid, many workplaces are gearing up for the first in-person Christmas party in three years. In […]

Signup To Our Weekly e-News

"*" indicates required fields

We’ll never share your details with any third party in line with our privacy policy.