Commercial Property Article
06 July, 2017
With the rise in holiday rentals, Airbnb has become a popular platform for short-term lets, allowing hosts to advertise all or part of a property for rent, whether it be a penthouse apartment, a tree house or even still, a boat.
Airbnb, a company which started in San Francisco with a small apartment and inflatable air bed, now has approximately 100 million users, and over 80,000 active rentals in the UK.
Many hosts are however (often unknowingly) in breach of rules and regulations, with several facing legal action as a result. Hosts should therefore be aware of the following legal pitfalls before listing their property on Airbnb or similar sites:
- Mortgage terms - Check the provisions of your mortgage. Residential mortgages generally prohibit sub-letting and therefore you should obtain your lender's consent. This could result in an increased mortgage rate, however this would arguably be more favourable than a penalty payment or urgent repayment demand. Surprisingly, most buy-to-let mortgages also prohibit short-term letting, so exercise caution when reviewing the terms and conditions.
- Planning laws - Sub-letting your property may constitute a change of use under planning laws. Consequently, you may be required to obtain planning permission from your local authority. In London, short-term letting is permitted for up to 90 days of the year, however those exceeding this allowance could be liable for a considerable fine.
- Insurance - Your buildings and contents insurance may be invalidated if you have not disclosed that the property is being used for short-term letting. Airbnb do provide a 'Host Guarantee' and 'Host Protection Insurance' which cover damage to the property caused by guests, however there are a number of exclusions and limitations and therefore this should not be considered a substitute.
- Other restrictions - Check your tenancy, lease or registered title for any restrictions on sub-letting. The recent case of Nemcova v Fairfield Rents Limited highlights the issue of restrictive covenants limiting the use of a property. In this case, the long-term lease contained a restrictive covenant not to use the property 'other than as a private residence'. The leaseholder had facilitated a number of short-term lets via Airbnb and was subsequently found to be in breach of the restrictive covenant. This is a common clause in leases so be sure to check the terms and seek your Landlord's permission where necessary.
- Tax - As part of the Government's 'rent a room' relief, individuals who rent out their main or only residence can qualify for up to £7,500 tax free rental income. The Government are however consulting on proposals to remove this tax break for short-term lettings.
For further information on the above or for any commercial property related queries, please contact our Commercial Property Department on 0800 689 0831.