Dealing with the discovery of unlawful holiday lettings

With AirBnB properties becoming increasingly popular for booking holiday and temporary accommodation, there are many people offering their properties online for short-term lets. In some cases, if the property is leased, the tenant may be in breach of their lease agreement.

Daniel Long, a specialist at WHN on landlord and tenant disputes, explains how landlords can deal with these matters by outlining a recent case dealt with by WHN Solicitors.

We recently assisted a landlord client on several matters that concerned short-term holiday lettings which were in breach of the terms of the leases for the properties involved.

The client owns a significant portfolio of residential and commercial property and is the landlord of multi-let residential spaces where the tenants hold long leases for their individual flats.

The business owner discovered, through neighbouring residents, that tenants were unlawfully sub-letting the leased premises. He also discovered evidence of flats being advertised online through AirBnB and other websites. At this point in time, there was no agreement in place allowing such use of the properties.

Our client sought to bring a stop to the unlawful activity, or alternatively to seek a wider commercial benefit from the situation subject to new terms of agreement with the tenants.

The problem with short-term lettings

The emergence of AirBnB lettings is not a new phenomenon but has gained further popularity since Covid-19, with holiday makers now more frequently choosing short-term stays in the UK.

Regular short-term lettings can be problematic for landlords as their properties are occupied by different and often unknown inhabitants on a regular and rolling basis. Not only does this increase the risk of damage to the rental properties, but the coming and going of different occupiers can be a nuisance to neighbouring residents and may also create insurance implications for landlords.

In both matters where the tenant was sub-letting the rental property, we identified various breaches or potential breaches of the leases, which included:

• Breach of user
• Breach of the alienation provisions
• Breach of covenants relating to alterations
• Breach of planning consent
• Breach of insurance obligations
• Beach of covenants not to cause a nuisance, annoyance, or disturbance.

Two different solutions to the same sub-letting problem

In relation to our client’s two properties, the matters were resolved in different ways for each tenant.

In the first scenario, our team was ultimately able to negotiate a substantial premium payable to the client in return for the client agreeing to vary the leases to allow the activity to continue, subject to conditions outlined by the client (as the landlord). The client opted to seek a solution that enabled the tenant to continue to sub-let the leased property, with a new agreement that was financially beneficial to the client.

With regards to the second tenant and leased property, a similar approach was adopted. However, after our initial correspondence, the tenant immediately ceased all online advertising for AirBnB lettings, cancelled all upcoming bookings and agreed to pay all our client’s legal costs. The door was then left open for the parties to directly discuss the possibility of a premium being paid to the landlord by the tenant, to allow the activity going forward.

In each matter, we analysed the relevant authorities on the subject and applied these to the facts, along with assessing individual breaches of the lease. The first matter was not a straightforward negotiation. The tenant’s initial stance (via solicitors) was to dispute the client’s position and deny any breach of the lease. In relation to the second matter, we were able to achieve the client’s objective with a single letter and recover all costs.

What action to take if you discover your tenant is sub-letting leased premises

For landlords who might discover their tenant is using a flat or apartment for AirBnB or short-term holiday lettings, here are several actions points to follow:

• If your tenant has, without your consent, been taking bookings for regular short-term holiday lettings, it is worth taking advice on whether the tenant is allowed to use the premises for this purpose.
• Such use may amount to a breach of the lease covenants relating to the user, sub-letting or what is known as ‘parting with possession’ and the occupation may also amount to a private nuisance.
• If the tenant has modified the let premises to enable the lettings, it may also amount to a breach of a lease’s alterations clause. Landlords should also consider any insurance implications and whether such use could increase the insurance premium payable.
• Your objective as a landlord may simply be to cause the tenant to stop taking bookings and advertising short-term holiday lettings. But alternatively, you may be inclined to consider varying the lease to allow the short-term lettings in return for a premium. Either way, WHN can assist landlords who find themselves in this situation.

Can I advertise my leased flat for short-term holiday lettings?

If you are tenant and are looking to use your premises for AirBnB or other holiday lettings, you should carefully check the terms of your lease to ensure you are entitled to use the premises in this way and seek any necessary consents from your landlord.

If you are acting in breach of the terms of your lease, this could entitle your landlord to claim damages from you, take other measures to stop you from using the premises for AirBnB lettings or even take steps to forfeit your lease.

The legal authorities in this area generally favour landlords when it comes to interpreting the terms of leases so tenants should take care to ensure the activity is permitted before risking the landlord pursuing various remedies against you.
Whether you are a landlord or tenant, WHN can advise you on what is permitted by the terms of your lease and explore commercial solutions.

Daniel Long is a director at WHN Solicitors and heads up the firm’s commercial department and property disputes team.

He specialises in resolving disputes between landlords and tenants of commercial leases on matters including rent and service charge recovery, dilapidations, forfeiture, possession, insolvency-related matters, and lease renewal and termination.

For advice on how to deal with the unlawful sub-letting of leased premises, please contact Daniel on 0161 761 8063 or email him at [email protected]