Many properties – both leasehold and freehold – will be subject to a fairly common restrictive covenant “not to use the property other than for private residential purposes”. We are repeatedly asked, by clients and estate agents whether such a covenant would prohibit short-term holiday lets. Indeed, with the upsurge in popularity of Airbnb and similar booking platforms, there is a rising number of instances of neighbours being dissatisfied with and challenging such arrangements.
In 2001, the Court of Appeal was asked to consider[i] a clause in a lease, which prohibited the use of the property “…for any purpose other than that of a private dwelling house”. The property in question had been used for short holiday lets and the Court found that this use was a breach of the covenant.
A similar case was considered, more recently[ii] which specifically involved letting through Airbnb. The court was asked to address the issue:
“a long lease contains a covenant not to use the demise premises…for any purpose whatsoever other than as a private residence. If the leaseholder advertises on the Internet the availability of the flat for short-term lettings and grants a series of such lettings, are the leaseholder’s actions a breach of the covenant?”
… the decision was made that granting very short-term lettings of the flat did indeed breach the covenant.
In short, if considering letting a property for holiday rentals or Airbnb, it’s essential that the title is checked to ensure that there are no restrictions on doing so.
A homeowner must also bear in mind other considerations such as seeking their lender’s consent (residential mortgages will likely be breached if the property is let and lenders will tend to “convert” the mortgage to a commercial rate of interest if they do approve); possible breach of planning, Building Regulations and health and safety legislation as well as the impact or even invalidation of buildings insurance
[i] Caradon District Council v Paton & Bussell (2001) CA 33 HLR 34
[ii] Nemcova v Fairfield Rents Ltd (2016) UKUT 303 (LC)