Short-term letting caused breach of tenancy agreement
Author: Bukola Aremu and Charlotte Walker
Applies to: England and Wales
A recent case highlights the risks for owners of flats in letting out their premises on a short-term basis.
In 2015 Londoners were freed from planning laws which curbed their rights to rent out their own home on a short-term basis. Of course thousands were already renting their houses and flats through websites such as Airbnb and OneFineStay but this change in the law meant that they no longer risked a fine of up to £20,000 for doing so without consent.
Recent years have seen this letting market increase exponentially but it is not without its controversies or drawbacks. Landlord Action, a legal advice helpline, reports that growing numbers of tenants are subletting in breach of covenant. Aside from breach of tenancy agreements and additional wear and tear to a property, landlords are often left exposed to potential breaches of their mortgage terms and at risk of invalidating their insurance.
Even tenants who own their own houses or flats on a leasehold basis should not assume that they are free to let out their properties as they please, as demonstrated by the recent decision in Nemcova v Fairfield Rents Ltd  UKUT 303 (LC).
Miss Nemcova owned a 99 year lease of a flat in Enfield. She was frequently absent and granted a series of short-term lettings of the property, usually to business visitors working in London. She estimated that it was let for about 90 days a year.
The lease of the flat did not require Miss Nemcova to occupy it as her only or main residence. Nor did it prohibit use of the flat for a business, short-term letting, occupational licences or holiday lets. There was no restriction on selling or underletting the whole of the property except in the last seven years of the term. However, the lease contained a covenant not to use the property 'for any illegal or immoral purpose or for any purpose whatsoever other than as a private residence'. The landlord objected to the short-term lets, apparently because the other occupiers of the block were complaining about the succession of residents.
The tribunal had to decide whether by advertising the flat on the internet and granting a series of short-term lettings, Miss Nemcova was in breach of this covenant. This meant considering the meaning of the phrase 'a private residence'. This did not necessarily mean that the flat had to be 'the' private residence of the tenant. The tribunal said that use of the indefinite article 'a' was significant. A person may have more than one private residence at any time - a permanent home and other temporary residences which are used when he or she is away from home on business or holiday. But, it did require a connection between the occupier and the residence: the property must be regarded by the occupier using it as his or her residence for the time being.
This meant that the duration of occupation was material. The tribunal found that for a property to be used as a private residence there has to be a degree of permanence going beyond a stay for just a weekend or a few nights in the week. A person who occupies a property for such a short period of time is not doing so 'as a private residence' because the occupation is so transitory. Miss Nemcova was therefore in breach of the user covenant in her lease.
This dispute involved Miss Nemcova in long and undoubtedly costly litigation, which she lost. Even though her lease did not prohibit underletting, the user covenant had the same effect in preventing short-term letting.
It is clearly vital that any tenant of leasehold property - whether a flat or a house - checks their legal obligations before entering into an arrangement of this nature. Landlords' remedies for breach of the provisions of a lease can be significant and can involve the leasehold owners in considerable expense if litigation ensues.
This document is for informational purposes only and does not constitute legal advice. It is recommended that specific professional advice is sought before acting on any of the information given.