Airbnb creates legal hazards

5th March 2018 | Caroline Vernon | Residential Property

If you let property through Airbnb, you could be facing a legal minefield. Its rapid growth which provides an online platform for individuals to rent their homes or spare rooms short-term, has caused a stir across the world. But the... Read more

If you let property through Airbnb, you could be facing a legal minefield. Its rapid growth which provides an online platform for individuals to rent their homes or spare rooms short-term, has caused a stir across the world. But the law has not kept up with the technology, leading to a range of hazards for those who let through the platform.

It has become such an issue that frequent use of Airbnb can effect private property, according to new-build developers. Their reaction has been to try to restrict such short-term letting when leasing new apartment blocks.

Leasehold risks

Some cities have tried to regulate the Airbnb model. Authorities in New York, Berlin, Barcelona and San Francisco, to name a few, have started requiring permits for such business.

In London, landlords need permission to use a property as temporary sleeping accommodation for fewer than 90 days a year, under the Deregulation Act 2015. Local authorises can fine landlords for breaches, under the Town and Country Planning Act 1990.

In the UK, the risks increase for leasehold property, although there are also local considerations for freehold property. Most leases restrict sub-letting part or all of the property.

They will also usually restrict the property to be used only as a private residence occupied by a single family, and prohibit using the property as a business. It is rare to see a flat lease without these restrictions.

Furthermore, leases will contain covenants regarding any use of the property that causes a nuisance and annoyance, and a covenant to comply with all building insurance policies.

The case of Nemocova v Fairfield Rents Limited 2016 ruled that in granting a series of short-term Airbnb lettings, the leaseholder breached the covenant to use the property as a private residence.

A tenant who breaches the lease terms risks a claim for damages and or forfeiture proceedings, which require them to remedy the breach and pay monetary compensation.

They may also be breaching the insurance policy and their mortgage terms.

Assured tenancy danger zone

Where a tenant has an assured tenancy or an assured shorthold tenancy and seeks to sub-let on Airbnb, they face several legal dangers. They may be breaching the letting terms, and if the property is social housing, they could be criminally liable.

The legal occupation of such short-term rentals are on a licence basis and not as a tenancy agreement so security of tenure is less of an issue. This therefore has the beneficial effect that a licence to rent out the property as a house in multiple occupation is not required under the Housing Act 2004 and the sub-tenants’ right to rent does not need to be considered under the Immigration Act 2014 and due to the licence nature of the tenancy, the deposit protection requirements will not apply under the Housing Act 2004.

However, regulations require that gas safety certificates, smoke and carbon monoxide alarm, and energy performance certificates will need to be obtained.

This area has become a particular minefield and until the law catches up with technology, it will continue to present a range of legal hazards for those involved.

To find out more, please contact Caroline Vernon.