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Considering renting out your flat? Check the lease first!

View profile for Spencer Davis
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A ruling of the Upper Tribunal's Lands Chamber means that thousands of flat owners who rent out their homes are probably breaking the law. The issue is due to 'private residence only' clauses, a common feature of such leases.

With an estimated four million leaseholders in Britain, the ruling is expected to have a significant impact on short-term lettings companies like Airbnb.

The decision was made after the neighbours of Ms N, a Slovakian interior designer, became concerned about strangers regularly staying at her one-bedroom flat in Enfield. The freeholder eventually decided to take legal action. 

At the Tribunal, Ms N admitted renting out her property on Airbnb, TripAdvisor and holidaylettings.com. She had even created her own lettings website. However in her defence, she argued that she had remained within her lease's 'private residence only' clause by virtue of paying council tax and bills, and also because she stayed there 'three or four days a week’. Furthermore Ms N pointed out that her lease did not explicitly ban her charging people to stay in her flat short-term whilst she was away.

The question for the Tribunal was whether the flat was being used as the occupier's private residence. For that to be the case, Judge Stuart Bridge said that there must be a ‘degree of permanence’ about Ms N’s occupation. It was found that staying at the flat for a few nights per week was insufficient to be deemed permanent.

Judge Bridge said: ’Granting very short term lettings (days and weeks rather than months) necessarily breaches the covenant [not to use the property as anything other than a private residence].’

Although the Tribunal's ruling does not affect people who rent out rooms while they too are staying at the property, it is likely to affect the thousands who rent out whole properties on sites like Airbnb.

Anyone letting out their leasehold flat on a short-term basis should check to see if their lease contains a ‘private residence only’ clause. If there is such a clause, and if the freeholder takes action upon finding a breach, there is now a clear precedent that such a use would constitute a breach of the leasehold agreement. A breach could result in legal proceedings, with the possibility of being forced to pay legal costs and ultimately have the lease forfeited.

The above is not legal advice. It is intended to provide information of general interest about current legal issues.

At Gepp & Sons we have an experienced Dispute Resolution team who can offer assistance on a range of litigation issues. To get in touch please call 01245 493939 and ask for the Dispute Resolution team. Alternatively contact Michael Callaghan at callaghanm@gepp.co.uk or Justin Emerson at emersonj@gepp.co.uk