Over the past few years there has been a massive boom in private properties being rented out for short periods on websites such as AirBnB, Booking.com and House Trip etc. as a standalone business, or for supplementing other income. If you rent your property on, or through, one of these sites, or are thinking about doing so, here are a number of things you should consider.
1. Your Lease
If you are a leaseholder you must ensure that you understand the covenants that you have signed in your lease. Most importantly you need to ensure that the lease does not contain any covenants preventing you from letting your property. If you are in breach of any of the covenants in your lease your freeholder will be able to take action against you for breach which in the worst cases could ultimately lead to an application for forfeiture of your property.
Leases will usually contain covenants that prevent a leaseholder from sub-letting the property, in part or in whole; letting the property as a holiday let; using the property other than as a private residence; and/or using the property other than as a residential property for one family only. Some leases will permit such lettings but only with the prior, usually written, consent of the Freeholder and/or Managing Agent.
Running a business
In addition most leases also contain a clause that prevents the leaseholder from running a business from the property. Even if the lettings are only for short periods of time, the fact that you will be accruing income from the lettings means that your actions will be taken to be akin to running a business as far as the covenants of your lease are concerned.
Noise and Nuisance
Leases may also have covenants in relation to the prohibition of noise such as no loud music between certain hours, or doing anything that could cause a nuisance to other leaseholders. There have been recent incidents where AirBnB guests have held, sometimes very, large parties at properties causing not only destruction of the let property, but also a breach of the lease. If the property is let on a regular basis this could cause additional nuisance and security concerns to other leaseholders with an increase of people coming and going. This may be a particular concern in modern buildings where access to communal areas is through a security code given out to those letting the property.
Leases may also have a covenant preventing pets being in the property. You would need to ensure that anyone that you are letting the property to would not bring any pets with them for their stay.
2. Your mortgage lender
You must also ensure that you understand the terms of your mortgage. Breaching the terms of your agreement or failing to obtain consent when required could lead to the mortgage lender requiring that the mortgage be repaid in full or potentially even making an application to repossess the property.
Only or main residence
Most mortgage agreements will contain a term that requires the property to be occupied by the owner as their only or main residence.
Mortgage agreements will also usually contain terms that prevents sub-letting of the property or alternatively require the consent of the mortgage lender in order to sub-let the property. Such consent may be accompanied by a requirement that the owner pay a higher rate of interest on their mortgage and/or other terms being amended.
Running a business
In addition to possibly being in breach of the covenants of your lease if you are a leaseholder, the terms of your mortgage agreement may also prevent you from running a business from the property or doing so without prior written consent.
You could also be in breach of your mortgage agreement if you do not have adequate and valid insurance for the property.
3. Health and safety
By letting out your property you will be classed as a landlord and also that you are running a business. Therefore Health and Safety Legislation will apply to you and you must comply with all relevant regulations.
If you hold insurance for the property (buildings and/or contents) you must also read the terms of your policy very carefully to ensure that you do not invalidate your insurance policy by letting out your property and/or by running a business from the property. This could also affect your mortgage agreement as detailed above.
5. Council owned property
In a recent case this year a council flat tenant called Tony Harman, who went by the name “Lara” on AirBnB, was recently caught out for renting out his flat in breach of the terms of his tenancy since 2013. Westminster Council took him to Court, managed to evict him, and he was ordered to pay back over £100,000 in unlawful profits. The moral of the story is do not rent out your council owned property without prior written consent, which is highly unlikely to be granted.
6. Do you really know who you are letting to?
One final matter to consider is that in most lettings you may not get to meet the people you are actually letting to, or be able to vet them sufficiently other than perhaps reading reviews of them left on the websites. In the current climate of fake news and fake reviews you should always be cautious when letting out your property. There have been reports in the news of short-term online lettings being used by prostitutes travelling around the country or for “pop-up brothels”. This is not to mention illegal raves/parties being held at properties. Just ask Elizabeth Sterling, whose £2.5 million flat in Kensington was ruined after the woman who rented it through AirBnB had a party there attended by hundreds of people. That guest has been suspended from the website while the matter is investigated but it still leaves a huge clean-up bill and a lot of aggravation.
Always check your lease, your mortgage agreement, the health and safety regulations and that you are not going to let to someone who may wreck your property.
This article is provided for informational purposes only and it does not constitute legal advice and cannot be relied upon as such. This article may not be updated after it was first written even if the law in this area changes. It is recommended that specific professional advice is sought before acting on any of the information given. If you would like to make an appointment with one of our team to discuss this or any other matter please call 01323 720142.